Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

MANCHESTER SHIP CANAL BILL

Queen's Consent, on behalf of the Crown, signified.

Bill read the Third time and passed.

LONDON COUNTY COUNCIL (GENERAL POWERS) (No. 2) BILL (By Order)

Consideration, as amended, deferred till Thursday next.

LIVERPOOL OVERHEAD RAILWAY BILL [Lords] (By Order)

Second Reading deferred till Thursday next.

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Exploration of the Sea (Copenhagen Discussions)

Mr. Hector Hughes: asked the Minister of Agriculture, Fisheries and Food if he is yet in a position to make a statement on the Report of the meeting of the International Council for the Exploration of the Sea, held in Copenhagen from 21st October to 2nd November, 1955, when about seventy papers dealing with fisheries research were under consideration; if he will place a copy of the Report in the Library; and what action he proposes to take upon it.

The Minister of Agriculture, Fisheries and Food (Mr. D. Heathcoat Amory): The International Council has not yet published this Report, a copy of which I shall place in the Library when available. The discussions covered the recent work of member countries in the field of fishery research and greatly assist the programming of future work.

Mr. Hughes: Does the Minister realise that these reports and the work of this Council are of the utmost interest to the fishing industry, and deserve the widest possible publicity, and that not to give it defeats one of the purposes for which the Council was founded?

Mr. Amory: I hope that the Report will receive the widest possible publicity, but, as the hon. and learned Gentleman knows, of course, these reports are scientific and very technical, and are not, perhaps, suitable for consumption by the ordinary man in the street. They are, however, of the very greatest value, and I hope they will receive the widest possible circulation in the quarters for which they are intended.

Cheese and Butter (Home Production)

Sir I. Fraser: asked the Minister of Agriculture, Fisheries and Food by how much the home production of cheese and butter has increased in the last two years; and what percentage of our total consumption is now met by home production.

Mr. Amory: Home production of cheese was 29 per cent. less in 1955 than in 1953, a record production year. Creamery butter production was 17 per cent. more in 1955 than in 1953. In 1955, home production of cheese represented 29 per cent. of our total consumption and of creamery butter 5 per cent.

Sir I. Fraser: In view of the fact that we in Britain make some of the best cheeses in the world, and that we have milk to spare, will my right hon. Friend look with a fresh mind at the whole question whether Britain cannot make more of her own cheeses herself?

Mr. Amory: I agree with my hon. Friend that our speciality cheeses are worthy of a still higher level of consumption, and I am very anxious to do every-thing that I can to popularise them. I am glad to say that the consumption of them is going up. My hon. Friend will be aware, of course, that milk is supplied to the cheese manufacturers, as to other manufacturers, at a price considerably lower than the normal full price.

Sir I. Fraser: May I ask my right hon. Friend if that low price for milk also


applies to the individual farmers who make cheeses?

Mr. Amory: I think it applies to manufacturers of all cheese which is sold.

Prices (Annual Review)

Sir I. Fraser: asked the Minister of Agriculture, Fisheries and Food what estimate was made of prospective increases in the cost of fuel, power and transport in fixing farm prices at the last Annual Review.

Mr. Amory: None, Sir. It is not the practice at an Annual Review to provide against possible future increases in costs.

Sir I. Fraser: Does that mean that there is no contingency fund, and that, in fact, farmers have to work on a Review which, so long as there is any degree of inflation, must be adverse to their interests?

Mr. Amory: If there are any future increases which, at the time of the Review, are known or are predictable, then allowance is made for them. In the case of any other additional costs arising during the year, if there is a sudden or substantial increase in costs, there is a Special Review procedure which can take account of it.

Lieut.-Colonel Bromley-Davenport: asked the Minister of Agriculture, Fisheries and Food whether he is satisfied that in his recent negotiations with the farmers' unions there was general agreement with his proposal for a global £25 million increase; what disagreement there was about the allocation thereof; and whether he will give further details about the negotiations which led to this conclusion.

Mr. Willey: asked the Minister of Agriculture, Fisheries and Food at what stage, and in what manner, the farmers' unions indicated to him that if their schedule of changes had been accepted there would have been an agreed settlement in the recent Price Review.

Mr. Amory: There is nothing I can add to the reply I gave to my hon. Friend the Member for. Taunton (Mr. du Cann) on 31st May. I regret that I cannot give detailed information about the exchanges at Annual Reviews between the farmers'

unions and the Government, since these are confidential.

Lieut.-Colonel Bromley-Davenport: Is my right hon. Friend aware that many farmers simply do not believe the statement issued by him—[HON. MEMBERS: "Oh."]—as to the agreement reached between the National Farmers' Union and his Department over the total award? Is this not because the farmers have been grossly misled? Will my right hon. Friend consider making a broadcast so that the true facts of this matter may reach, not only the farmers, but the taxpayers as well, who like to know how and why their money is spent?

Mr. Amory: I think that the statement I made in reply to a Question last week cleared up the situation. I do not believe there is any misunderstanding today. I hope that we can now regard this matter as closed, and can look to the future rather than to the past.

Mr. Willey: Is the right hon. Gentleman aware that I desire to take no party advantage of this misunderstanding? I only desire to get it cleared up. Unlike his hon. and gallant Friend the Member for Knutsford (Lieut.-Colonel Bromley-Davenport), I do not cast any aspersion on Sir James Turner. Is the right hon. Gentleman aware that Sir James Turner has made a statement saying that the National Farmers' Union rejected both the total figure and the Government's schedule for allocating it? In the cir. cumstances, would it not be better and franker to say that there has been a misunderstanding between the right hon. Gentleman and the National Farmers' Union?

Mr. Amory: I hope that the hon. Gentleman will reread the answer which I gave to a supplementary question last week, which did mention how easy it is for misunderstandings to arise, with different interpretations of an incident. I am satisfied that the Answers that I have given have cleared up the situation, and I really cannot think of any word I could add to make the position still clearer.

Egg Marketing Scheme

Sir I. Fraser: asked the Minister of Agriculture, Fisheries and Food what progress he can now report on the preparation of an egg marketing scheme.

Mr. Holt: asked the Minister of Agriculture, Fisheries and Food whether he has considered the Report of the commission on the egg marketing scheme; and what action he proposes to take.

Mr. Amory: The public inquiry into objections to the proposed egg marketing scheme submitted by the three farmers' unions was completed on 13th April. The commissioner who held the inquiry is now preparing his Report, and I expect to receive it in a week or so.

Sir I. Fraser: Will a statement be made to this House within a week or so?

Mr. Amory: No. I shall have to consider the Report when I receive it, and the Government will then have to decide whether to put the scheme, either in its present or in a modified form, before Parliament.

Mr. Champion: Will the Minister publish the verbatim report of the evidence which was given before the commission? It has aroused tremendous interest, and we should have it available to us.

Mr. Amory: The hon. Member for Derbyshire, South-East (Mr. Champion) knows that it has previously been the practice not to publish the reports of commissions, but my colleagues and I will consider the question when the Report reaches us.

River Ouse, Whitgift

Mr. G. Jeger: asked the Minister of Agriculture, Fisheries and Food whether he is aware of the need to strengthen the banks of the River Ouse at Whitgift, so as to prevent serious flooding of the adjacent agricultural land; and whether he will consult the Yorkshire Ouse River Board with a view to expediting its proposals for this work.

Mr. Amory: I have arranged for this matter to be discussed with the river board at a meeting to be held later this month.

Farmers (Supervision and Dispossession)

Mr. Wade: asked the Minister of Agriculture, Fisheries and Food how many farmers were under supervision on 30th April, 1956; and how many had been dispossessed in the year 1st May, I955. to 30th April, 1956.

Mr. J. Eden: asked the Minister of Agriculture, Fisheries and Food how many cases of dispossession of land on the grounds of poor husbandry he has confirmed since October, 1951.

Mr. Godman Irvine: asked the Minister of Agriculture, Fisheries and Food how many orders for dispossession have been made under the Agriculture Acts during the last twelve months; what number applied to tenants and owner-occupiers, respectively; and what number included the dwelling-house.

Mr. Amory: Since 31st October, 1951, 259 farmers have been dispossessed on grounds of bad husbandry. The number dispossessed since 30th April, 1955, was seven, of whom five were tenants, and two owner-occupiers. In four of these cases the order covered the farmhouse. The number of farmers under supervision on 30th April, 1956, was 225.

Mr. Wade: In view of the fact that the number of cases of dispossession is not such as materially to affect the standards of husbandry, the expense involved in applying this procedure, and the distress and hardship caused to individuals who are evicted, will the Minister now consider abandoning this procedure alto-gether?

Mr. Amory: These policies are, of course, always under constant review. I would remind the hon. Gentleman that the Agriculture Act, 1947, contains a balance between benefits and obligations. Though I am aware of the concern felt among the public outside about these matters, it is very seldom indeed that I get a complaint from inside the farming community.

Mr. Eden: Does my right hon. Friend confirm the dispossession orders imposed in each case before action is taken on them? Does he review the cases?

Mr. Amory: Every case is considered at Ministerial level.

Mr. Champion: Will the Minister always keep in mind that it we give to the farmers security of markets and stability of prices, we can and we ought to expect from them a reasonable degree of efficiency in their use of the land?

Mr. Amory: I recognise that we have only a very limited quantity of good agricultural land in this small island, and


that inevitably we are losing a good deal of it every year for purposes of development.

Mr. Farey-Jones: asked the Minister of Agriculture, Fisheries and Food whether he will initiate at the earliest possible moment such legislation as will prevent a repetition of dispossession of homes and property such as recently occurred.

Mr. Amory: Such an amendment of existing legislation raises wide issues. While I have these issues very much in mind, I cannot accept any suggestion that recent dispossessions were unjustified, having regard to the existing law.

Mr. Farey-Jones: May I ask my right hon. Friend whether adequate thought has been given to the practice—I am concerned not so much with individual cases as with the vital principle that lies behind the utilisation of such powers, and any elected member of this House has a duty to safeguard human liberty? That is what I want my right hon. Friend to consider.

Mr. Amory: I will bear in mind what my hon. Friend has said.

Mr. Paget: Does the right hon. Gentleman accept the proposition upon which the 1947 Act was founded, that the possession of land in England involves a trust to use it properly? Will he stick to that and not be frightened off it by his hon. Friends?

Mr. Amory: I think that I have replied on that aspect of the case in answering a previous Question.

Mr. G. Wilson: Is my right hon. Friend aware that many young farmers who have difficulty either in obtaining a lease or purchasing agricultural land welcome my right hon. Friend's insistence that agricultural land shall be used rightly?

Mr. Amory: I agree with my hon. Friend that it is extremely galling if, because of the very strong demand for farms, farmers who cannot get possession of land see a promising farm abused.

Local Organisation and Procedures (Committee's Report)

Mr. Willey: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the Report on the

provincial and local organisation and procedures of his Department.

Mr. Amory: Consultations with county agricultural executive committees and other organisations concerned are proceeding but in view of the far-reaching effect of some of the Wilson Committee's recommendations it is bound to be some little time before I can make a statement.

Mr. Willey: Appreciating that, and recognising that this is a first-class Report, may I ask the right hon. Gentleman to pay regard to the fact that the Wilson Committee itself says that this is the time to carry out these reforms because of the integration of the Ministries of Food and Agriculture?

Mr. Amory: I entirely agree with what the hon. Gentleman has said. I should like to pay another tribute to the thoroughness with which Sir Arton Wilson and his colleagues carried out a difficult task.

Captain Duncan: In view of the national need for economy and of the fact that the recommendations of the Arton Wilson Report would save at least £500,000 a year, will my right hon. Friend press on with these reforms?

Mr. Amory: Yes, and I am sure that my right hon. Friend the Chancellor of the Exchequer will give me no chance of doing anything but that.

Lady Garbett (Dispossession)

Mr. Farey-Jones: asked the Minister of Agriculture, Fisheries and Food whether, in view of the disquiet occasioned by the dispossession of Lady Garbett, he will initiate urgent steps to restore the lady and her family to their rightful domicile.

Mr. Crouch: asked the Minister of Agriculture, Fisheries and Food the circumstances in which Lady Garbett was evicted from her farm at Horam in Sussex; and why a dispossession order made in 1953 was withdrawn by him, and not reissued until October, 1955.

Mr. J. Eden: asked the Minister of Agriculture, Fisheries and Food (1) why Lady Garbett, of Horeham Manor Farm, Horam, Sussex, was dispossessed of her house and land; and when he approved the action;
(2) when he will permit Lady Garbett, of Horeham Manor Farm, Horam, Sussex, to reoccupy her own farm house and her own land.

Mr. Godman Irvine: asked the Minister of Agriculture, Fisheries and Food why, in the recent case at Horam, Sussex, the owner-occupier was removed from her house.

Mr. Amory: A proposal to dispossess Lady Garbett was made in April, 1953, after three years of supervision. Lady Garbett appealed to the Agricultural Land Tribunal, but in view of the legal flaw in the notice the Ministry offered no evidence, and the appeal was allowed.
Lady Garbett remained under supervision, and a further inspection in May, 1955, showed that the farming had greatly deteriorated. For example, the cereal crop from the 1954 harvest had been wasted; the land was foul; and the farm was understocked. In the opinion of the county committee it is the worst case it has experienced.
In June, 1955, the Committee recommended dispossession, which was approved. Lady Garbett did not appeal, and a dispossession order was made on 26th October, requiring her to let the land to an approved tenant by 2nd February, 1956.
Lady Garbett took no action, and in March, 1956, the committee requested vacant possession within fourteen days. On 16th May a warrant was obtained from the justices requiring vacant possession to be given.
After careful consideration, the Committee advised that inclusion of the farm house was essential for proper farming, there being no other living accommodation on this holding. I understand that Horeham Manor Farm was not Lady Garbett's only home.
On the evidence before me, I am satisfied that I should be failing in my responsibility under the Agriculture Act if I were to permit her to resume occupation.

Mr. Crouch: Did my right hon. Friend carry out properly and conform strictly to the 1947 Act of the Socialist Administration in removing Lady Garbett? Was she evicted or did she leave her farm house, and, if the latter, when did she leave? What previous experience had

she of farming before entering upon this holding, and how much did the output—my right hon. Friend mentioned that it dropped—drop during the last twelve months of occupation?

Mr. Amory: The answer to the first part of the question is that the procedure has been entirely in accordance with the Act. The committee has in fact shown the greatest possible restraint and patience in dealing with this case. The reply to the second part of the question is that when the time came, Lady Garbett was, I think, evicted. The third part of the question dealt with production and Lady Garbett's farming abilities. I do not know what Lady Garbett's farming experience was before she took possession of this farm, but I do not think it could have been very much, seeing the way in which the farming has been conducted since.
As to production during the time, production throughout the four years has been extremely small, and with a decreasing trend. Production during the last twelve months was at a very low level indeed.

Mr. Eden: Is my right hon. Friend aware that there is very great concern—[HON. MEMBERS: "Where?"]—not among those who have no value for private property and personal freedom at all, but among the public generally—at the wide powers which Departmental officials have, not only to enter private property, but also to turn people out of their homes—[Interruption.]

Mr. Speaker: Order. Let us have the question heard and answered.

Mr. Eden: Is my right hon. Friend further aware that in this case the fact of whether or not Lady Garbett has another home has no bearing whatsoever on the question?

Mr. Amory: In reply to my hon. Friend I would say that these cases are of course extremely difficult, but I should like to emphasise one or two things. Lady Garbett has not been dispossessed of her property. She remains the owner of this farm. She has the alternatives of selling it or letting it herself to an approved tenant, or letting it to the committee so that the committee can let it to an approved tenant. What I can no longer accept is that Lady Garbett can remain in occupation of the farm.

Mr. C. Howell: Does not the right hon. Gentleman agree that hundreds of people have been dispossessed of their homes, although they are making a far greater contribution towards the benefit of the country. without any protest from hon. Members opposite?

Oral Answers to Questions — EMPLOYMENT

Warwickshire Coal Field

Mr. Moss: asked the Minister of Labour what special steps are being taken to offset the loss of manpower in the Warwickshire coal field, and with what results.

The Minister of Labour and National Service (Mr. Iain Macleod): Special and continuing attention is given to coal mining vacancies in the Warwickshire coal field by employment exchanges in the area and also in other parts of Great Britain, and a Press publicity campaign has been undertaken in conjunction with the National Coal Board to increase the labour force there and in other areas where manpower in the mines is deficient. The number of workers on colliery books in Warwickshire increased by 162 in the first seventeen weeks of 1956 compared with a decrease of 91 in the same period of 1955.

Wage Negotiations

Mr. Shinwell: asked the Minister of Labour whether he will consult his advisory committee on the desirability of appointing a committee to consider the application of a national wages policy.

Mr. Iain Macleod: No, Sir. The Government are not contemplating any change in our traditional policy of leaving wages to be settled by direct negotiation between employers and workers in individual industries.

Mr. Shinwell: Is the right hon. Gentleman aware that this would not in any way impinge upon traditional policy, except in a modified sense? Is there not something to be said for giving consideration to a more progressive method of dealing with wage questions? Has the right hon. Gentleman not given the matter consideration?

Mr. Macleod: Yes, Sir, I have given it a great deal of consideration. If the proposition is that all these negotiations

and decisions should be considered and taken in the light of full knowledge of the country's economic position, of course I assent to that. We shall do everything we can to disseminate that knowledge as widely as possible, but if the suggestion is for a State co-ordinated wages policy, I am bound to say that I am certain that would be resented and opposed by both sides of industry, and I do not think it a practical proposition.

Mr. Shinwell: Will the right hon. Gentleman be good enough to look at certain documents on this subject which were presented during the period of office of the Labour Government whilst I was at the Ministry of Fuel and Power?

Mr. Macleod: I will look at those. The right hon. Member raised this question to some extent in a debate about a year ago, when he referred to the need for an economic council. I should have thought that the Government had quite enough advisory bodies in this and, indeed, in all other fields. As to the main question of a national wages policy, I am quite certain that that would not be acceptable to both sides of industry at present.

Mr. Gibson: In view of the impact of new electronic methods and automation on production, is not this a matter which could be discussed at national production committee meetings with a view to seeing if there is a possibility of such a method of settling wages being worked out?

Mr. Macleod: I am taking to the National Joint Advisory Council, over which I preside, some of the problems of automation, and we shall be discussing them next month.

Standard Motor Company, Coventry (Redundant Workers)

Mr. Moss: asked the Minister of Labour what proportion of the labour force at Standard Motor Company, Coventry, has been declared redundant; the reasons for such redundancy; and what suitable alternative employment is being found for those who lose their jobs.

Mr. Iain Macleod: I understand that the redundancy represents about 20 per cent. of those now employed. The reasons have been given in a statement


issued on 30th May by the Standard Motor Company. The employment exchange service is helping those who register to find suitable alternative employment and registrations at the works are proceeding. The prospects of finding employment in Coventry and immediately neighbouring areas for the redundant workers are good in the case of highly skilled engineering workers and machine operators. In the case of other workers, local employment is unlikely to absorb all the redundant men in the immediate future, but there are vacancies in many kinds of industrial and transport undertakings which could be offered to them within daily travelling distance of Coventry.

Mr. Moss: Whilst readily agreeing that the right hon. Gentleman will do his best to help men who are deprived of their livelihood, may I ask if it is not a fact that his efforts may be frustrated by lack of vacancies in the immediate neighbourhood and the immobility imposed on labour by the housing shortage? Is it not becoming increasingly apparent that the sacking of men ought to be related to a Government plan for their reemployment and, if necessary, their retraining?

Mr. Macleod: As to the first part of the supplementary question, I have answered the Question in regard to vacancies in Coventry and the immediate area. There are and will be difficulties, but on the whole the position is reasonably satisfactory, as the latest figures of employment and unemployment—published this morning—show. To reply to the second part of the supplementary question, I would say that that matter was dealt with by my right hon. Friend the Prime Minister last week. There are powers available to me as Minister of Labour in the whole of this field. I do not think it is possible to isolate automation or any other form of technological change from any of the other reasons which may lead to the need for mobility of labour.

Mr. G. Brown: I agree with the Minister's last remark, but will he go a little further? The Prime Minister said a day or two ago that the Government would take a number of steps to ease the transfer of these people who have to go away from Coventry for their work. Can the Minister say what steps he is taking,

and what are the powers open to him to which he has referred?

Mr. Macleod: If I may say so, that is not quite an accurate paraphrase of what the Prime Minister said. If the right hon. Gentleman would like a list of the methods which are available to my Ministry in re-training and the allied fields, perhaps he will put down a Question.

Mr. Brown: I am asking the Minister for a list of steps which he is taking. The Prime Minister said, "We will take all steps to ease the process of transfer of the individual worker". Those are the exact words. I am asking the Minister to tell us what steps, if any, he is taking.

Mr. Macleod: Exactly. I appreciate that, and I am asking the right hon. Gentleman, since that is another aspect of the matter, to put that Question down.

Mr. J. Griffiths: The Minister may recall that when in West Wales we were confronted, as we still are, with the problem of redundancy arising out of technological changes—although we did not call them automation—the Government set up a Committee called the Lloyd Committee to examine the problem and, in particular, the problem of providing alternative employment for those for whom no other employment was available in the immediate neighbourhood. In particular, it considered direct action by the Government in building factories. In his review of this problem, will the Minister consider such a step as that in the area concerned?

Mr. Macleod: I said long ago that if we are confronted with what is to some extent a new situation we should not exclude any solution at all, and I am quite prepared to repeat that now. I believe that to be true. On the other hand, I do not think that the situation now is in any way comparable with that to which the right hon. Member refers. There are a great number of vacancies—still many more vacancies than people seeking employment. Although I know perfectly well that there will be hardship in individual cases, I think we ought to be able to meet the demands from labour arising out of any situation which I can foresee in the position in the Midlands or, indeed, elsewhere.

Radio and Furniture Industries (Short-Time Working)

Mr. Hunter: asked the Minister of Labour the number of persons in the radio and furniture trade who are on short-time working, at the latest convenient date.

Mr. Iain Macleod: It is estimated that in the week ended 2nd June about 3,000 in the radio industry and about 8,000 in the furniture industry were working short-time.

Mr. Hunter: Will the Minister watch the position in these two industries? Short-time working appears to be increasing at a very rapid rate, and short-time working is very unsatisfactory to the work people employed in those two industries.

Mr. Macleod: Yes, I will certainly watch it, but in both industries which the hon. Member has mentioned the recent trend has been downwards. The figures have declined both in the radio industry and in the furniture industry—2,000 in one case and 1,000 in the other in the fortnight previous to the figures which I have just given.

Factory Inspectorate

Dr. Stross: asked the Minister of Labour how many factory inspectors are in the temporary grade; how many inspectors are seconded for work abroad; and how many, owing to lack of scientific and technical training, are attending, at the School of Technology, Leicester, a full-time course in scientific subjects.

The Parliamentary Secretary to the Ministry of Labour and National Service (Mr. Robert Carr): Eight factory inspectors are temporary, one is seconded for work abroad and twelve are attending the course at Leicester.

Dr. Stross: In view of the fact that we need as many inspectors at work as possible, if it be only to perform routine inspections, may we have an assurance that these temporary inspectors, who were appointed during the war, I believe, will be retained, and that their services will not be dispensed with?

Mr. Carr: It is, of course, our general policy to replace temporary staff by permanent officials, but the whole question of the Factory Inspectorate is being

reviewed by my right hon. Friend at the moment.

Mr. W. R. Williams: If these inspectors are in temporary employment after such a long period—as far back as the war—why has consideration not been given to establishment for them a long time ago, as is done in the rest of the Civil Service?

Mr. Carr: If the hon. Member has a specific question to ask on that point, perhaps he will put it down. I can reassure him that our Factory Inspectorate will be treated with fairness and consideration equal to that accorded to other sections of our service.

Dr. Stross: asked the Minister of Labour, in view of the fact that it was the policy of his Department in 1954 that 50 per cent. of recruits to the Factory Inspectorate should have technical qualifications, why this policy has not yet been fully implemented.

Mr. Iain Macleod: There is a general shortage of technically qualified persons, and the question what proportion of the members of the general Factory Inspectorate should possess technical qualifications is one that I am now examining.

Dr. Stross: Would the Minister bear in mind that in 1954 the then Parliamentary Secretary, now the Minister of Transport, made it clear that it was then the policy of the Department to accept that at least 50 per cent. should be fully trained technical officers on recruitment? Is it not a fact that the real difficulty is that the Ministry, perhaps under pressure from the Treasury, are not able to offer suitable salary scales under today's conditions?

Mr. Macleod: What the then Parliamentary Secretary said, on 12th November, 1954, was that
While we should like 50 per cent. of the inspectorate to be technically trained, the fact is that the work of the General Inspectorate is not of a professional character."—[OFFICIAL REPORT, 12th November. 1954; Vol. 532, c. 1640.]
I think that is slightly different from the gloss which the hon. Member has put upon those words. I can assure him that this is not a question of Treasury interference at all. I have in front of me a very fine Report. about which the hon. Member knows—the Departmental Report, which has recently reached me.


In the light of that, I am examining what would be the beg proportion, for the future, of technically qualified persons in the Inspectorate.

Dr. Stross: Will the Minister be good enough to let us see a copy of that Report? Will he place it in the Library, in view of the fact that he has not considered it desirable to publish it?

Mr. Macleod: A real difficulty exists here. It is not usual to publish such reports, as the hon. Member knows, but I recognise the interest in this matter. Partly because the Report is, I think, such an excellent Report, I will reexamine the way in which I can make hon. Members who are particularly interested in this subject cognisant of the main recommendations of the Report.

Dr. Stross: asked the Minister of Labour how many factory inspectors have been appointed since March, 1953; of these, how many are now in post; and, of these, how many are graduates in engineering, physics or chemistry, respectively, and how many have recognised professional qualifications in building construction or civil engineering.

Mr. Carr: Altogether, 57 factory inspectors have been appointed since March, 1953, of whom 48 are now in post. Of these two are graduates in engineering, two in physics, two in chemistry, and none has recognised professional qualifications in building construction or civil engineering.

Dr. Stross: Does not the answer highlight the very great difficulty with which the Ministry is faced? Is the Parliamentary Secretary aware that before the war two out of every three were fully qualified technically? Is not something radical to be done to see that the Inspectorate, which used to be a model which we held up before the whole world, returns to its original and pristine reputation?

Mr. Carr: We are certainly aware of the problems involved at the moment, but I would rather not add to what my right hon. Friend has said. Replying to the last part of the hon. Member's Question, I must stand up for the general quality of the work which is being done by the Inspectorate as it exists at the moment. I do not think that the hon. Member himself means to denigrate that in any way by his remarks.

Motor Car Industry (Short-Time Working)

Mr. Chapman: asked the Minister of Labour to what extent short-time working has now decreased in the motor car industry.

Mr. Iain Macleod: The estimated number on short time in the manufacture of motor cars and accessories, after rising to a peak of 52,000 at Whitsuntide, has since fallen to 22,000 in the week ended 2nd June.

Mr. Chapman: Is it not clear that the Government were grossly over-optimistic in expecting the situation to clear up during the summer? Is it not now full of forebodings for the coming winter? Would it not be better now, before the situation deteriorates in the autumn and the winter, to call together both sides of the industry, so that they can face the problem as it is likely to be?

Mr. Macleod: I should have thought that the decline in the figures for some considerable time shows that on the whole the Opposition, and particularly the hon. Member for Northfield (Mr. Chapman), were grossly over-pessimistic in the debate which took place on employment.

Mr. Bence: Would the right hon. Gentleman consult his right hon. Friends the Chancellor of the Exchequer and the President of the Board of Trade, because when we have high-cost technological equipment working only part of its potential full time, we tend to increase the cost of the product and not lower it?

Mr. Macleod: I do not dissent from that, and it is one of the matters about which we are in constant discussion now.

B.S.A. Works (Redundant Workers)

Mr. Lewis: asked the Minister of Labour what approaches he has had made to him concerning recent redundancies among employees at the Birmingham Small Arms Works; and what action he has taken or proposes to take to provide employment for those affected.

Mr. Iain Macleod: I am informed that notices were issued to 300 workers at the end of last week, but, apart from those who are leaving at their own request or


who are due to retire, they are being offered alternative work in one or other of the factories in the Birmingham Small Arms organisation. The services of the employment exchanges will remain available to assist any who, for one reason or another, find this offer unacceptable.

Mr. Lewis: May I first ask whether the Minister will check his figure, because I think that it is now 301? Is he aware that that one claims that he has been victimised? If there has, in fact, been victimisation, cannot the Minister inter. vene and perhaps refer the case to the individual's union so that that union can take up the matter for him? Will the right hon. Gentleman ascertain whether or not Sir Bernard Docker has been sacked because he has been touring round the world for six months of the year on his yacht, or whether there is not some other reason for this incident?

Mr. Macleod: I am bound to say that the hon. Member started his supplementary question so long ago that I have forgotten what it was, but if it was his usual supplementary question, I dare say that "No, Sir" will meet it.

Sir J. Hutchison: In this complicated matter, would my right hon. Friend consult the dockers' union?

Norton Motors Ltd. (Dispute)

Mr. J. Silverman: asked the Minister of Labour what steps he is taking to intervene in the industrial dispute at Norton Motors Limited, Birmingham, which has resulted in a strike of several hundreds of workers.

Mr. Iain Macleod: I am aware of this dispute, but my Department has not been asked to intervene. I understand that there is procedure available within the industry for discussing matters of this kind.

Mr. Silverman: As this matter has now reached a complete deadlock, and as the dispute has now lasted for six weeks, will the Minister reconsider whether he can take any action? Will he also say whether, if invited by one party or another to use the services of conciliation, he is prepared to do so?

Mr. Macleod: The dispute has been going on for a long time, it is true, but

it has only been an official dispute since 29th May. I think that both sides know that existing machinery is available for use. Both sides equally know that I am very ready to try to help through my conciliation machinery if I can, but I think it is right that, the position having been made clear, this should be left to them. If I am invited to help, I will, of course, do everything I can.

Disputes (Dismissals)

Mr. J. Silverman: asked the Minister of Labour whether he is aware that mass dismissals of workers engaged in industrial disputes are endangering industrial peace; and if he will call a conference of both sides of industry in order to discuss means of improving conciliation machinery so as to prevent such situations arising.

Mr. Iain Macleod: If the hon. Member is referring to recent events in the motor industry I am, of course, aware of the position and my Ministry keeps closely in touch with it. But these difficulties are more than matters of machinery and I have no grounds for thinking that a conference of the kind suggested would serve a useful purpose.

Mr. Silverman: Is the Minister aware that I am referring specifically to the sort of action which has been taken in relation to the Norton Motors strike, and which has been taken by several firms? In the event of an industrial dispute the practice has been to sack all the people on strike. Does not the Minister agree that that is a course of action likely to create great industrial bitterness and to prolong the dispute?

Mr. Macleod: Of course, it is possible that industrial bitterness can come from any redundancy or large-scale alteration in size of a labour force. The Answer which I gave to the hon. Member's main Question was that these are much more than machinery matters. I believe that the existing machinery is adequate. Part of the trouble is that frequently the machinery is not used, and often there are not early enough consultations with the unions most concerned. It should always be the case that negotiation should start from the beginning of any proposal which may effect the size of a labour force.

Oral Answers to Questions — NATIONAL SERVICE

Science and Engineering Graduates (Deferments)

Mr. Willey: asked the Minister of Labour whether he will consult with representatives of the universities and technical colleges and of industry regarding the effect upon the recruitment of students of the granting of deferment of National Service to certain categories of graduates and those holding equivalent qualifications.

Mr. Iain Macleod: Deferment is not granted to any category of graduates as such but deferments are granted to certain individual science and engineering graduates who are engaged in work of particular national importance. I have received no representations as to the effect of deferment of this kind on the recruitment of students to universities and technical colleges.

Mr. Willey: I appreciate what the Minister has done but, at the same time, recognising the desperate shortage there is of particular scientists, will he go a little further to see that these particular scientists, who can serve no particularly useful purpose in the Services, go where they are so urgently required?

Mr. Macleod: The number of deferments this year is expected to be about 1,400, and it is a graph that has been climbing very steeply indeed over the last two years.

Oral Answers to Questions — HOME DEPARTMENT

Birmingham Prison

Mr. C. Howell: asked the Secretary of State for the Home Department how many prisoners are held in Winson Green Gaol, Birmingham, and what is the normal capacity of the gaol; how many of these prisoners resided, prior to conviction, within the City of Birmingham; how many prisoners, who were convicted at Birmingham, have been transferred to other prisons during the past five years; and how many of these have been returned to Winson Green, subsequently.

The Secretary of State for the Home Department and Minister for Welsh Affairs (Major Gwilym Lloyd-George): On 29th May, 1956, there were 509 male

prisoners in Birmingham Prison and 73 female. Under normal conditions the prison has in all accommodation for 520 men and 148 women, of whom 397 men and 113 women can be accommodated in ordinary accommodation as distinct from special accommodation such as hospital wards, etc. I regret that the other information requested is not available.

Mr. Howell: Would the right hon. and gallant Gentleman explain to the House what factors are taken into consideration before convicted prisoners are put on the transfer list? Does he not agree that it increases the punishment of convicted persons if they are taken so far away from the area in which they are convicted. as they are then not able to have the facilities for visits as they would have if they were taken to a prison nearer to their own homes?

Major Lloyd-George: I can assure the hon. Member that I have every sympathy with the point which he has just expressed. It is difficult, I know, but under existing circumstances we are compelled to move people to avoid gross overcrowding.

Murders

Sir F. Medlicott: asked the Secretary of State for the Home Department how many murders have taken place in this country during the last three months; and how this figure compares with the number of murders committed during the corresponding period of each of the five preceding years.

Major Lloyd-George: I regret that the figures for May, 1956, are not yet available. The number of murders recorded as known to the police during the months of February, March and April, 1956, was 42. The corresponding figures for preceding years were: 1951, 31; 1952, 48; I953, 52; 1954, 46; 1955, 56.

Sir F. Medlicott: Whilst it is difficult to draw any final conclusion from these figures, do they not at least indicate that the fears of a sudden, and perhaps dramatic, increase in the number of murders have not been realised?

Major Lloyd-George: As I think my hon. Friend will remember, I did indicate during one or two of the debates which we have had on the Death Penalty (Abolition) Bill that even a period of ten


years would scarcely be sufficient to come to a conclusion in these matters, and I am certain that three months would not be sufficient.

George Henry Canning

Mr. S. Silverman: asked the Secretary of State for the Home Department whether it was on his instructions that at the inquest on George Henry Canning, who died in one of Her Majesty's prisons, the prison officer concerned, the governor of the prison and the Prison Commissioners were all represented at the inquest by the same solicitor and counsel; and when and on what grounds it was decided that the interests of these parties to the inquiry were not in conflict.

Major Lloyd-George: These arrangements, for which I accept responsibility, were made by the Prison Commissioners after taking legal advice. As regards the governor, it is routine practice for a solicitor or counsel representing a Government Department to represent also the officer in charge of the unit or branch concerned
As regards the officer, the Commissioners, on the information before them, following the police investigation of the case, saw no reason to foresee any conflict of interests. Accordingly, on 4th May they offered to arrange for their representative to watch his interests if he so wished, and he accepted.

Mr. Silverman: Does not the right hon. and gallant Gentleman appreciate how very unsatisfactory his Answer is? Does he not appreciate that this was a case in which a man, for whose personal safety the Prison Commissioners were responsible, had died in circumstances of some violence, and that where-as the right and duty of the prison officer was to defend himself from criticism, the duty of the Prison Commissioners was to be impartial and to ascertain the truth—[HON. MEMBERS: "Speech."]—this is a very important matter—and, that, therefore, since the evidence—[HON. MEMBERS; "Speech."]. Mr. Speaker, may I be allowed to ask the Question?

Mr. Speaker: Order. Let the Question be asked and answered.

Mr. Silverman: Therefore, since the evidence was known to be conflicting,

there was an obvious difference of interest between the Prison Commissioners and the prison officer, and that an inquiry in which those conflicting interests were represented by the same solicitor and counsel was obviously a travesty of justice?

Major Lloyd-George: The hon. Gentleman will probably not be surprised to hear that I could not agree with what he says. The fact is that when this occurrence took place, the police made the fullest investigations, entirely independent of any prison officer at all. They were allowed to question all prisoners without any prison officer being present. As a result of the investigation, the governor and the Prison Commissioners came to the conclusion that there was no conflict of interest whatever between the prison officer and the Commissioners, and therefore they decided that those men should be represented by the same persons.

Mr. Silverman: Does not the right hon. and gallant Gentleman realise that what he has just said amounts to a statement by the Home Office, for which he is responsible, that they, with the assistance of the police, prejudged the very question which the coroner was investigating?

Major Lloyd-George: That is quite an inaccurate statement.

Mr. Silverman: It is not.

Major Lloyd-George: The investigation was made by the police and not by the Home Office. If the hon. Gentleman has anything to say about the coroner, I can only repeat what he is reported to have said—namely, that everybody would agree that the inquiry had been very properly carried out.

Mr. Younger: While not wishing to suggest that there has been an improper motive in this matter, may I ask the Home Secretary whether he will take full account of the fact that the public is necessarily very much more anxious about the form of inquiry into events which occur in prison under strict authority than about an inquiry conducted into events occurring outside? Will the right hon. and gallant Gentleman consider whether in future it would not in the normal case be better that there should be separate representation of all parties,


even if it happens to be the opinion of the police or the Prison Commissioners that there is no conflict?

Major Lloyd-George: I will look into that point, but I think it is proper to point out that there was obviously no conflict in this particular case, and, so far as the public are concerned, there was an inquiry by the coroner, who expressed the view that the investigation was very properly carried out.

Mr. S. Silverman: asked the Secretary of State for the Home Department what steps he took to ensure that the relatives of George Henry Canning were legally represented at the inquest into his death in prison.

Major Lloyd-George: It was for the relatives themselves to decide whether to be legally represented at the inquest and to seek legal advice on this matter if they were in doubt, and no action was called for on my part.

Mr. Silverman: Does not the right hon. Gentleman even yet appreciate that the whole conduct of the matter was hopelessly biassed from the start, and that if the right hon. Gentleman came to the conclusion that it was proper for the prison officer to be represented at public expense by solicitor and counsel instructed by him, this ceased to be a routine matter, and the relatives of the man principally concerned ought to have been offered the same facilities?

Major Lloyd-George: I must once again repudiate what the hon. Gentleman has said. He is so biassed in this matter.

Mr. Silverman: I am not.

Major Lloyd-George: He obviously is biassed. I have made plain that the whole of this inquiry was perfectly properly conducted.

Mr. Silverman: I do not agree.

Major Lloyd-George: That convinces me even more that what I am saying is right. It was open to the relatives to have legal representation if they had wanted it. Both this man's brothers were there for two days of the inquiry, and one was there for the other day. It was open to them to have legal representation if they wanted it.

Mr. Speaker: It seems to me from what I have heard that this is a matter which cannot be thrashed out at Question Time without infringing the rights of other Members. The hon. Member should try to raise the matter on the Adjournment, and, in the meantime, ask Question 39.

Mr. S. Silverman: asked the Secretary of State for the Home Department what facilities were afforded, prior to the inquest, to the relatives of George Henry Canning to inquire into the circumstances resulting in his death.

Major Lloyd-George: I am not clear what sort of facilities the hon. Member has in mind, but in fact none were requested.

Mr. Silverman: Does not the right hon. and gallant Gentleman appreciate that where there was a body of evidence which blamed a prison officer for the death, and a substantial body of evidence which denied it, then the opportunity of which the Prison Commissioners availed themselves for questioning both sides and arriving at an opinion, which prejudged the whole issue, ought to have been offered to the relatives of the man who died? Does not the right hon. and gallant Gentleman appreciate that all the witnesses in the case were in his custody and under his control the whole time?

Major Lloyd-George: That is quite untrue. I have said in reply to the hon. Gentleman's first Question that when the police made their inquiries no prison officer was present.

Mr. Silverman: That is not my point.

Major Lloyd-George: It is one of the points, anyway. With regard to prejudging the case, I would ask the hon. Gentleman to read what the coroner said at the end of the inquiry.

Mr. Silverman: On a point of order. In view of the wholly unsatisfactory reply to these three Questions, I beg to give notice that I shall take the earliest opportunity of having the matter debated.

Trading from Vans (Legal Closing Hours)

Mr. Ledger: asked the Secretary of State for the Home Department whether he is aware of the increase in trading


from vans after the legal closing hour of 8 p.m. for fixed shops arising from a decision given by Lord Justice Hewart some years ago; and if he will now amend the law to bring to an end competition now being experienced by occupiers of fixed shops who have to pay high rentals and increased rates this year.

Major Lloyd-George: I am aware that the law relating to shops needs revision, both as regards trading otherwise than in shops and other matters, and I would refer the hon. Member to the Answer I gave on 10th May to the hon. Member for Newcastle-under-Lyme (Mr. Swingler).

Mr. Ledger: Is the Minister not aware that the Shops Act, 1950, has not cleared up the confusion that arises on the question of the hour until which these vans can trade? In a recent case the principal of a firm said that the question of the hours worked by his employees was left entirely to them, and that the commission which he offered encouraged them to work until late at night?

Major Lloyd-George: That is why I have said that legislation is necessary and will be introduced as soon as practicable.

Party, Stepney

Mr. Lewis: asked the Secretary of State for the Home Department (1) what complaints were made to the police at Leman Street Police Station during the late evening and early morning of 11th and 12th May, concerning a robbery at Swedenborg Square, Stepney what losses were reported; and whether he will make a statement;
(2) if he is aware that at a party at a licensed club in Swedenborg Square, E.1, during the late evening and early morning of 11th and 12th May, those taking part smoked marijuana cigarettes; what action the police propose to take against those responsible for breaking the law; and whether he will make a statement.

Major Lloyd-George: The Commissioner of Police of the Metropolis tells me that the police had been notified of the intention to hold the party at this address, which is not a registered club, that they visited the premises during the late evening and early morning, and also patrolled the vicinity. During the party

a handbag and a raincoat were stolen. There was no public disturbance, and the police are satisfied that marijuana cigarettes were not smoked.

Mr. Lewis: Has the Minister's attention been drawn to the Press report that a large amount of jewellery was stolen and reported as lost? Is the right hon. and gallant Gentleman further aware that the people in the East End, who work hard by day, wish to sleep at night so that they can be prepared to work the following day? Is the right hon. and gallant Gentleman aware that people did complain because this late night party kept lorry drivers awake? Will the Secretary of State consider the matter again?

Major Lloyd-George: There was one complaint about noise. That is the only one that has come to the notice of the police.

Trial (Transcript of Evidence)

Mr. M. Stewart: asked the secretary of State for the Home Department whether he will make available a transcript of the evidence given at the trial of George Frederick Thatcher on 23rd June, 1952, to Thatcher's Member of Parliament.

Major Lloyd-George: I regret that I have been unable to obtain a transcript of evidence given at this trial. The evidence has never been transcribed, and the shorthand writers inform me that despite prolonged and extensive search, they have been unable to trace the relevant notebook.

Mr. Stewart: Could the right hon. and gallant Gentleman say what firm of shorthand writers was responsible for this notebook?

Major Lloyd-Geoge: I do not think I can give the hon. Gentleman that information because the responsibility for shorthand writers is not mine. The hon. Gentleman had better put down a Question to my right hon. and learned Friend the Attorney-General.

Thermo-nuclear Weapons (Tests)

Mr. A. Henderson: asked the Prime Minister whether he will propose to President Eisenhower and Marshal Bulganin


that hydrogen bomb tests should cease immediately pending the outcome of the present United Nations discussions on disarmament.

The Prime Minister (Sir Anthony Eden): I shall, with permission, be making a statement at the end of Questions which will have reference to the right hon. and learned Gentleman's suggestion.

ECONOMIC AFFAIRS (ADVICE)

Mr. Emrys Hughes: asked the Prime Minister if he will consider strengthening the department that advises him on economic affairs.

The Prime Minister: The volume of advice which I already receive from many quarters on economic affairs—including the advice the hon. Member is, no doubt, about to give me—is formidable. I see no present need to add to it.

Mr. Hughes: Is the Prime Minister aware that he is rather weak on oil? Is he further aware that he delivered a series of what the Observer called dangerously misleading slogans last weekend on the subject of the Middle East, and argued that if we did not have Cyprus and if we did not have oil, we would have hunger and unemployment? Will the right hon. Gentleman ask the Foreign Secretary to ask the Government of Sweden how the Swedes get oil without any bases in the Middle East?

The Prime Minister: That would be a very interesting exercise, and Sweden can no doubt take her responsibility. There is not the slightest doubt that the economy of this country and of its neighbours in Western Europe depends upon oil from the Middle East.

Mr. Strachey: Would not the Prime Minister consider appointing in this respect his new supporter Mr. Khrushchev who, I see, said yesterday, "I am for the Conservatives"?

The Prime Minister: I have tried to make a rule not to interfere in the internal affairs of foreign countries.

BRITISH OIL COMPANY (STOCK UNITS)

Mr. H. Wilson: (by Private Notice) asked the Chancellor of the Exchequer if he is aware of the bid which has been made by an American company for the stock units of a British oil company, and in view of the importance, for the maintenance of full employment, of the continued control of oil supplies, whether he will use his power to prevent the control of this company from passing to foreign hands.

The Chancellor of the Exchequer (Mr. Harold Macmillan): The Answer to the first part of the Question is Yes, Sir. On the second part, Her Majesty's Government are, of course, concerned to ensure that the interests of Trinidad are fully safeguarded, and are in touch with the Government of Trinidad on this aspect of the matter. While they are anxious not to put obstacles in the way of United States investment in appropriate cases, they have not yet had time to give full consideration to this matter in all its aspects.

Mr. Wilson: While the Chancellor is considering this matter in all its aspects, will he realise that things are moving very quickly? Should he not take as his first principle the fact that basic supplies within this country should, so far as possible, not pass out of the control of this country? Secondly, has he noticed, from the remarkable—or, perhaps, not so remarkable—increase in the price of shares on the Stock Exchange today, that some people at any rate think that the result of an increase in the monopoly holding in the British oil industry by American interests is going to provide very good pickings for somebody, presumably at the expense of the consumer? Will he therefore be prepared to take quite speedy action to deal with this problem?

Mr. Macmillan: All these are matters which are under consideration at the moment.

Sir B. Baxter: Is the Chancellor aware—as I am sure he is—that the Trinidad company is the one big employer, the only big employer, in Trinidad, and that this sell-out to the American dollar, if it takes place, will have a disastrous effect


upon the whole Caribbean Federation? Will my right hon. Friend take that seriously into account, because of our already dwindling Empire?

Mr. Macmillan: Those are all matters which, as soon as I heard of this at all, made me consult the Colonial Secretary and immediately get in touch with the Government of Trinidad.

Mr. J. Griffiths: May I ask the Chancellor whether, in view of the fact that hon. Members on all sides of the House look forward with very great interest indeed to the establishment of a Caribbean Dominion in the not-too-distant future, he will, in addition to consulting his right hon. Friend the Colonial Secretary, have consultations with the Minister in the Caribbean who will be deeply concerned about this?

Mr. Macmillan: I have said that I am in touch with the Colonial Secretary; no doubt he will bring all these aspects of the problem to my attention.

Mr. Bellenger: Would the right hon. Gentleman be good enough to inform the House whether the Government's approval is necessary before any contracts are exchanged in connection with this deal?

Mr. Macmillan: All that depends upon the character of the deal; these are rather technical points upon which different aspects of Government consent may be required, according to the character of the proposed transaction.

Mr. Callaghan: Would the Chancellor please reconsider his last answer, and not rely purely upon the technical aspects of this matter? Will he not take into account the fact that the British Commonwealth today is producing only one-quarter of its oil requirements, and that we shall need much more? Will he bear in mind that there are fundamental political considerations at stake here? Will he make a very early statement that the Government will take steps to prevent any transfer of the seat of power in this company out of this country?

Mr. Macmillan: I think that the hon. Gentleman has quite mistaken what I said. I was asked what powers the Government had. The question of what legal powers the Government have is a technical matter, because they depend upon the precise character of the transaction proposed. It is into all those questions that we are now inquiring.

Mr. Gaitskell: May we be assured that, if the Chancellor's investigations reveal that he has not got the necessary powers to prevent this deal, he will come to the House and ask for them?

Mr. Macmillan: That is quite a different question.

Sir R. Boothby: Does my right hon. Friend realise that it is really important that a quick decision should be taken here? Does he realise the urgency of it?

Mr. Macmillan: Of course, it is important to have a quick decision; but it is also necessary to know precisely what is proposed in order that we may have an opportunity of considering it.

Mr. Gaitskell: Is the Chancellor aware that he certainly gave the House the impression that the Government were not very enthusiastic about this deal and that they would try to prevent it? How does he reconcile that with his last remark, which suggested that if he had not got the powers he might not wish to take them?

Mr. Macmillan: As this matter is in a sense sub judice, I have tried—[Interruption.] It is quite useful to know precisely what is proposed before we know what precise decision to take on it. It seems to me that the order of importance is to know what is the attitude of the colonial Government concerned what is the effect upon the Colonial Territories concerned, and to consider the effect upon our own economy. When we have considered all that in its broad aspects, we will make as early a decision as it is practicable to make.

BUSINESS OF THE HOUSE

Mr. Gaitskell: May I ask the Lord Privy Seal whether he will state the business for next week?

The Lord Privy Seal (Mr. R. A. Butler): Yes, Sir. The business for next week will be as follows:
MONDAY, 11TH JUNE and TUESDAY 12TH JUNE—Committee stage of the Finance (No. 2) Bill
WEDNESDAY, 13TH JUNE and THURSDAY, 14TH JUNE—Report and Third Reading of the Restrictive Trade Practices Bill
FRIDAY, 15TH JUNE—Consideration of Private Members Bills

Mr. Gaitskell: Can the right hon. Gentleman say whether the Government will find time for an early debate on technical education? Is is long overdue.

Mr. Butler: I have said previously that I feel sure that this subject is so near to the hearts of the right hon. and hon. Gentlemen opposite that they will find time on a Supply day for such a debate.

Mr. Gaitskell: While not necessarily conceding that point, may we have an assurance from the right hon. Gentleman that we shall not have another week exclusively devoted to the Committee and Report stages of Bills, and that there will be at least one Supply day in it?

Mr. Butler: We certainly like to get through the Supply days and to allot them as fairly as we can; but it is, I think, important to make progress with the Finance Bill and to conclude the Restrictive Trade Practices Bill. Then the right hon. Gentleman's desire for a Supply day will be met.

Mr. H. Wilson: Has the Lord Privy Seal noticed that this side of the House, at any rate, has been extremely co-operative on the Finance Bill and that any delays he may find in that respect come from his own supporters, or his own critics, at any rate, who have put down far more Amendments to the Bill than we on this side have? Will he, in his anxiety to space out the time of the House fairly, ensure that there will be adequate time for the consideration of

new Clauses, which we had no opportunity whatsoever of debating in the two previous Finance Bills?

Mr. Butler: I have already apprehended that it is the desire of right hon. and hon. Gentlemen opposite that there should be time on this occasion, in view of last year's experience, to discuss new Clauses. We are seized of that point and we propose to afford opportunities for such discussion. My hon. Friends have a sincere interest in certain aspects of this Bill, and as we remain a free country, and we are a free House of Commons, I see no reason why they should not have as much right to put down Amendments as right hon. and hon. Gentlemen opposite.

Mr. Ellis Smith: May I ask the Leader of the House whether he is aware that there is great support on both sides of the House for the proposal to appoint a Business Select Committee? Has he now had an opportunity of considering that matter?
[This Houses urges Her Majesty's Government to move for a Select Committee which shall consider and report on the increasing advantage taken by Privy Councillors on the precedence afforded to them in the House in the light of the statement made by Mr. Speaker on the 25th April, 1956,regarding the practice of the House; and shall also consider the voting of credit and the need for a detailed examination of Departmental expenditure and any other suggestions which would assist the House and facilitate business.]

Mr. Butler: I have the hon. Gentleman's Motion, signed by a great many hon. Members, before me. I think we shall have some difficulty in conceding the point about Privy Councillors which the hon. Gentleman makes, because that is more a matter for the convention of the House and the ordinary procedure we adopt, rather than for a Select Committee. But I undertake to the hon. Gentleman and his hon. Friends that we shall consider the Motion which is on the Order Paper.

Mr. Ellis Smith: While thanking the Leader of the House for the sympathetic answer he has given, may I ask whether he will be good enough to give some


advice to those of us who strongly support the proposal to deal with Privy Councillors? We have had further evidence today to indicate the correctness of this suggestion. Will the right hon. Gentleman now be good enough to advise not myself, but those of us who desire to bring about a satisfactory solution of this question, what is the next step to take?

Mr. Butler: Perhaps the hon. Member would engage in mortal combat his right hon. Friend who sits immediately in front of him.

Mr. Shinwell: May I direct your attention, Mr. Speaker, to the inescapable fact that my hon. Friend's reference to examples which have occurred today is confined to what happened on the Opposition Front Bench, and that I have been strictly within the constitution and tradition of the House and have not asked any supplementary questions except on Questions I placed on the Order Paper? May I ask you, Mr. Speaker, whether Privy Councillors can be protected against these attacks by back bench Members?

Mr. Speaker: I shall do my best to protect the right hon. Gentleman if I feel that he stands in need of my protection.

Mr. Blackburn: Can the Lord Privy Seal say whether it is the Government's intention to find time for a debate on the White Paper on the Singapore Constitutional Conference?

Mr. Butler: I must discuss that with my right hon. Friend the Secretary of State for the Colonies.

Mr. D. Jones: Has the right hon. Gentleman seen the Motion on the Order Paper, which is supported by a number of my hon. Friends, dealing with the railways and offices parts of the Gowers Report? As it is now 12 months since the Prime Minister airily talked about those two parts, may we know from the Government of when they propose to introduce the legislation?
[That this House, while welcoming the progress made towards legislation to implement the recommendations of the Gowers Committee on the health, safety and welfare of agricultural workers,

regrets that no proposals for further legislation to implement the recommendations of the committee have been made by Her Majesty's Government and calls upon Her Majesty's Government to introduce such measures early in the next Session.]

Mr. Butler: As the hon. Member knows, the Government have already made a start with legislation, following the Gowers Report, in dealing with agriculture. My right hon. Friend the Prime Minister is not accustomed to using airy language. We are aware of the Motion on the Order Paper, a copy of which I have before me. While I can give no undertaking for this Session, I can say that this is a matter of great interest to Her Majesty's Government.

Mr. S. Silverman: While I welcome the right hon. Gentleman's reaffirmation a few minutes ago of the rights of a free House of Commons, may I ask whether he can give the House any indication of the Government's ideas about time for the Report stage and Third Reading of the Death Penalty (Abolition) Bill?

Mr. Butler: Yes, Sir. We have made quite good progress with the Committee stage, and in due course we shall make good progress with the Report and Third Reading of the Bill. When I am ready, I will give the House an indication of how soon we can take it. It will be as soon as is reasonably possible.

Mr. Harold Davies: In view of the statement by the Chancellor of the Exchequer to the Foreign Press Association about defence and defence cuts, will the House have an opportunity in the near future for a debate on the Government's policy on defence?

Mr. Butler: We had better first see what my right hon. Friend's proposals are for affecting the economies which he has undertaken to carry out.

Mr. H. Wilson: Since the financial year is now well under way, and we understand that there may be important cuts in essential services, quite apart from defence, can the right hon. Gentleman say when he expects the Chancellor of the Exchequer to be able to inform the House of the decisions which the Government are taking to cut £100 million from this year's Estimates, and when we shall be able to debate them?

Mr. Butler: The Supplementary Estimates are usually published before the end of July. Therefore, the right hon. Gentleman can take it that there will be a decision before that date.

THERMO-NUCLEAR WEAPONS (TESTS)

The Prime Minister: With your permission, Sir, and that of the House, I will make a statement.
In the Statement on Defence, 1955, Her Majesty's Government announced their intention to manufacture thermo-nuclear weapons. As I have previously stated. the holding of tests is an essential part of the process of providing ourselves with such weapons. The United States of America and the Union of Soviet Socialist Republics have already held such tests and Her Majesty's Government have decided to carry out a limited number of nuclear test explosions in the megaton range.
These will take place during the first half of 1957 in a remote part of the Pacific Ocean. The explosions will take place far from any inhabited islands and the tests will be so arranged as to avoid danger to persons or property. The tests will be high air bursts which will not involve heavy fall-out. All safety precautions will be taken in the light of our knowledge and of experience gained from the tests of other countries. The main base of the aircraft of the Royal Air Force taking part will be Christmas Island, in the Pacific Ocean, and meteorological facilities will be installed there. Her Majesty's Governments in Australia and New Zealand have agreed to make available to the task force various forms of aid and ancillary support from Australian and New Zealand territory. We are most grateful for this.
In reaching this decision Her Majesty's Government in the United Kingdom have given full weight to the anxiety which exists about the indefinite continuance of tests of nuclear weapons without control and without limitation. I emphasised on 6th December last year in the House that Her Majesty's Government were prepared to discuss methods of regulating and limiting test explosions which take account of their position and that of other Powers. This remains the policy of Her Majesty's Government and we shall seek every opportunity to put it into effect.

Mr. A. Henderson: The Prime Minister's statement referred to what he said on 6th December, when he expressed his willingness to enter into discussions on the question of control and limitation. Surely that is totally inadequate. Is the Prime Minister not prepared to take the initiative in making concrete proposals to the Governments of Russia and of the United States with a view to securing the control and limitation to which he has referred?
The Prime Minister suggested that when the explosions take place next spring, there will be little heavy fall-out. As the right hon. Gentleman knows, many people are concerned as a result of the statements that have been made about the presence of a radioactive fall-out substance known as strontium, which, apparently, has most deleterious effects upon the human system. Can he say whether there are any fears on the part of the Government about that possibility?

The Prime Minister: As to the first part of the right hon. and learned Member's question, action has already been taken. We and the French tabled our disarmament proposals in this connection in March and they will, no doubt, be considered with other proposals when the Disarmament Commission meets, which I think it will do in a few weeks' time, in New York. That seems to me to be the best place to discuss this business.
As regards the precautions, the right hon. and learned Gentleman can be sure that in taking our decision we have taken account of all the considerations he has mentioned. The Medical Research Council's Report, of which the House is aware, will, I hope, be available to the House and made public in the course of next week, and I suggest that the House should examine it. I would certainly deprecate any alarmist conclusions, because I am sure they would be wrong, before that Report has been read.

Mr. Wade: Will the Prime Minister clarify one point in his statement? As he is aware, the general public are worried about the consequences of these tests and those who are not experts find it difficult to understand the technical aspects. I understood the Prime Minister to say that these high air bursts would not involve heavy fall-out. To remove


misunderstanding, will the Prime Minister explain the relationship between the height of the bursts and the absence of heavy fall-out? Is it not generally true that the higher the burst, the more widespread the fall-out?

The Prime Minister: I share with the hon. Gentleman absence of technical, scientific knowledge, but I would say that we have tried to use the experience of others in this matter, and this higher burst does result in less heavy fall-out and, therefore, less danger to anybody concerned. As to the general effect of these tests on health in the world in general, as I say, this Report is shortly coming out. It is a very thorough, well documented publication, and I would ask the House to study it before coming to any conclusion.

Mr. Beswick: May I ask the right hon. Gentleman two or three questions? First, whether he did not have a little twinge of conscience when he announced that the air base of this operation would be Christmas Island? Secondly, he says that the explosion will be far away from any inhabited island, but is he aware that men have been injured and, indeed, killed far away from air bursts? Can he say how far away is the nearest inhabited island? Thirdly, will he state quite definitely whether we, as a nation, are for the abolition of tests before or after this series, or not? Are we disposed to agree with others for the suspension of all further tests or not?

The Prime Minister: On the matter of our conscience, I would say without hesitation that what has been the most powerful deterrent in preventing a dangerous drift towards war has been the knowledge in the minds of all nations of what the consequences would be. Certainly, I do not see any reason why this country should not make experiments similar to those that have been carried out by both the United States and Soviet Russia. That is all that we are doing. [HON. MEMBERS: "Following them."] I have said that we are prepared to work out systems of limitation. Personally, I think it desirable and I think it possible.
As to the question of danger to people in the vicinity, we have considered that carefully, and if the hon. Member has studied this question he will know that as the practice of these tests has con-

tinued it has enabled us to arrange them so as very much to diminish the risk that took place from the earlier tests.

Mr. Gaitskell: May I return to the question of the Government's willingness to discuss the methods of regulating and limiting explosions? Were any precise proposals put forward by the Government on this matter in the disarmament discussions, and, if so, were they discussed and what objections were raised to them? What are the obstacles in the way of reaching agreement on this extremely vital matter?

The Prime Minister: We put forward in the Anglo-French proposals suggestions for various degrees in which this matter could be handled first by a limitation—this is in the White Paper which has been published—of nuclear tests at a certain stage and then later their banning. That is what is in the proposals we and the French put forward together. I imagine—it is not for me to say—that when the United Nations Commission discusses the various proposals in six weeks' time, or less, it will take into account the Anglo-French proposals—I imagine they would be very high on the list—and discuss them. I think that the right hon. Gentleman will probably agree that that is the best place for examination to take place of what can be done.

Mr. Gaitskell: Will the right hon. Gentleman give an assurance—I am sure he will—that the Government will pursue those proposals in the Commission with the greatest possible energy?

The Prime Minister: We are certainly in favour of the proposals we put forward with our French allies, and certainly will support them.

Several Hon. Members: rose—

Mr. Speaker: We cannot debate the matter now. There is no Question before the House.

SCOTTISH ESTIMATES

Committee of Supply discharged from considering the Estimates set out hereunder and the said Estimates referred to the Scottish Standing Committee:—

Class VIII, Vote 12, Department of Agriculture for Scotland;

Class IV, Vote 14, Public Education, Scotland.—[Mr. R. A. Butler.]

Orders of the Day — FINANCE (No. 2) BILL

Considered in Committee [Progress, 5th June.]

[Sir CHARLES MACANDREW in the Chair]

Clause 7.—(CHARGE OF INCOME TAX FOR 1956–57.)

The Chairman: The first Amendment selected is that in the name of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), but all the other Amendments down to the Clause can be discussed with it, for they are all concerned with the same point.

3.55 p.m.

Viscount Hinchingbrooke: I beg to move, in page 8, line 5, to leave out "two" and to insert "three".
I think the Committee will be grateful to the Chancellor of the Exchequer for moving to report Progress comparatively early on Tuesday so that consideration of this Clause affecting Income Tax and Surtax should not be cut in two. I think there is a corresponding obligation on my hon. Friends and me to be as brief as we possibly can in initiating this debate on Surtax.
Surtax, or super tax as it was then called, was started by Mr. Lloyd George as long ago as 1909, and it is rather interesting to reflect that he introduced it in that most famous Budget speech by saying that the principle on which he based his proposals was that taxation
should be of such a character as not to inflict any injury on that trade or commerce which constitutes the sources of our national wealth."—[OFFICIAL. REPORT, 29th April, 1909; Vol. IV, c. 501.]
The vast conglomeration of businesses under the leadership of the Federation of British Industries which annually presents proposals to the Chancellor of the Exchequer for the reduction of taxation, the equally large number of businesses which, no doubt, by devious means escape the consequences of taxation altogether, are, I believe, an apt commentary on the economic consequences of Mr. David Lloyd George.
It is interesting to look at the bed of Income Tax in which Mr. Lloyd George planted his original super tax. Income

Tax then began at an income of £150 per annum or £3 a week, a figure which Mr. Lloyd George quaintly phrased as dividing
sufficiency from gentility.…"—[OFFICIAL REPORT, 29th April, 1909; Vol. IV, c. 505.]
If one had £149 a year it was insufficient; if one had £150 it was sufficient; and over and above that gentility began. When one became gentle at £150 a year one paid at the rate of 9d. in the £1, and that figure ran quietly up to £2,000. At £2,000 there was a fierce and compelling increase up to £3,000 of 3d.
All this was the work not of Mr. Lloyd George, but of his many predecessors including the great uncle of my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach). Mr. Lloyd George's epoch making proposal on Income Tax was to increase it on incomes over £3,000 from 1s. to 1s. 2d. Thus Income Tax itself was progressive beyond the point at which super tax began—an interesting principle which, perhaps, we might work on in after years. Mr. Lloyd George proposed to levy his super tax on incomes of only £5,000 or over, but to apply it at the band of income exceeding £3,000—a very useful precedent for my hon. Friends today, and which, I hope, will perhaps attract the Liberal Party to our cause.

Mr. Victor Collins (Shoreditch and Finsbury): All of it?

4.0 p.m.

Viscount Hinchingbrooke: These poor people—perhaps one should call them rich people—had to pay another 6d. in the £ on their income at £5,000, another 9d. at £6,000, 10d. at £9,000 and 11d. at £18,000. There were very complicated systems for abatement for children and earned income, but the net result is that it would appear that in the year when Surtax was invented, 1909, a professional man with family responsibilities, earning £5,000 a year, paid tax at an effective rate of 1s. 6d. The income equivalent today is £20,000 or even more and the effective tax not 1s. 6d. but 15s. Our island does not seem to me to be any better defended. Indeed, our status in the world has somewhat shrunk and sometimes one wonders if it is not really cause and effect.
The Royal Commission on the Taxation of Profits and Income in


its Second Report, Cmd. 9105, recommended that the starting point for Surtax should vary with the taxpayer's family circumstances, becoming £1,500 for the single man, £2,000 for the married man without children, and increased by £160 for each child in respect of whom the taxpayer was entitled to receive child allowance.
I think that everybody in the Committee would want to pay very great respect to the opinion of those eminent gentlemen who served on the Royal Commission, but from our point of view on this side of the Committee there are two decided disabilities to their conclusions. The first is that they were tied by their terms of reference, originally proposed by the right hon. Member for Leeds, South (Mr. Gaitskell) and subsequently altered by the Chancellor of the Exchequer in the first Conservative Government of 1951. They were obliged to produce proposals which did not lower the general yield of taxation, and I am afraid that I have to say that however much one might want to congratulate them on their brilliant analysis of various sets of circumstances throughout their Report, as a precedent for Parliamentary discussion and reform their recommendations must fall somewhat short of what we on this side of the Committee had hoped for and expected.
The second disability of the members of the Commission is that their proposal in this respect was regressive from our point of view. To open up a new band of income below £2,000 on which Surtax would begin to be charged is not a concept which we on this side of the Committee should lightly entertain.

Mr. Roy Jenkins (Birmingham, Stechford): Will the noble Lord explain in a little more detail the exact meaning of that very engaging phrase "regressive from our point of view"?

Viscount Hinchingbrooke: Hon. and right hon. Members opposite can obviously regard it as progressive to reduce the band of income at which Surtax is first charged, and it is very reasonable that we on this side of the Committee should regard it as regressive. I hope very much that one day we will go in the other direction and do away altogether with Surtax and its expensive special commissioners, put up the Income

Tax to 10s. 0d., and so arrange allowances that all taxpayers derive benefit from the joint operation.
However, we make in the Amendment this limited attempt in the taxation field. I think that it is the first occasion for many years. I have not looked up each year since David Lloyd George's day, but I think that this is the first occasion on which a positive proposal to reduce Surtax has been made, although there have been many occasions when the Opposition has debated the proposals of a Chancellor of the Exchequer and sought to hold them back to what they were in the previous year.
On Second Reading of the Finance Bill I gave some parallels with German taxation. I will not repeat them, but it might interest the Committee to know how individuals in various classes fare in comparison with those in France. There is no reason why we should not take parallels from our neighbours and prosperous competitors. A man with an income of £2,000, single with no dependants, pays in this country £541 in tax and in France £490. A married man with no children pays £499 here and £360 in France. A married man with two children pays £414 here and only £191 in France. Indeed, we see throughout these tables—and I give only one more example—that the concessions made for children France are far superior to any made in this country at present.
I take as another example the man earning £5,000 a year. Here, the single man pays £2,326 in tax and in France £1,990. The married man with no children pays £2,284 here and in France £1,585. The married man with two children in this country pays £2,199 and in France only £1,071.
Hon. Members will want to know what the effect of the Amendment will be from the point of view of the reductions which it makes in tax liability. On an income of £2,000. for a married man with two children the tax now is £414. Under our proposals it will remain the same. On an income of £3,000 the tax now is £1,011 and under our proposals it will fall to £900. On an income of £5,000 the tax now is £2,200 and under our proposal it will drop to £1,973.
Hon. Members who think that this would have a large and consequentially


undesirable social and political effect on the very-large-income groups can be reassured, because the tax now on an income of £20,000 is £15,000 and under our proposals it will be £14,500. I hope that the Chancellor will correct me if I am wrong, but I believe that the cost of the Amendment would be £25 million in a full year if the tax band above £3,000 remains as it is at present, and £41 million if the tax bands are all shifted up—a concept which is always difficult to have in one's mind unless one sees it on paper.
I know that my right hon. Friend has made the point, that this is a savings Budget and that he cannot afford to release any further purchasing power to people at present. But it seems to me that there is an argument which applies with force to those people who are the executives and perhaps the younger and more successful executives, the administrators of the country, who have not made a large pile of money so far, but who have the responsibilities of married life, of homes and families.
The same argument applies as I sought to apply in the debate last Autumn when the Purchase Tax was increased. If taxation remains high, or if it is put up, the individual concerned who is on an established way of life goes immediately to the source of his salary, his employers, and begs for a further increase. We all know in business and in the professions how even in the last two years substantial increases in salary have been given to executive staff simply because the cost of living remains so high and because taxation grades are so steep.
If it is a mistake to increase Purchase Tax because the worker will immediately go back to his trade union and demand that a new wage claim should be formulated, then there is an almost exact parallel in this class of person, in that they go to their employers and ask that their salaries shall be improved. Therefore the anti-inflationary argument for high taxation cannot really prevail in the case of this class any more than it does for the generality of the workers of this country.
I wish to be brief because many hon. Members on both sides of the Committee want to speak in this debate. I come, therefore, to the really anxious matter

which this Amendment raises. I would define it as the undesirable social revolution that is going on within the middle and professional classes and which must be arrested. I am not talking about the social revolution which hon. Gentlemen opposite will say they took the lead bringing about, but which all parties engineered for the masses of our people during the war and since. That social revolution was established and consolidated and is respected by all, and nobody wants to undermine it.
However, during the war and since there has been a haphazard revolution of a nature which is not desired by either of the main political parties of the State. I have sensed many times in the speeches of hon. and right hon. Gentlemen opposite how disagreeable they find it. And when hon. and right hon. Gentlemen opposite desire, as a party, to raise the salaries of any administrative profession they are part of the revolution whilst expressing dissent from it. The revolution concerns the entrepreneur, the business man, on his own account or in association with others. By the expenses allowance which now prevails he is escaping the consequences of high taxation, where-as the professional men and the salariat are caught by high taxation and cannot escape from it.
I have heard the hon. Member for Sowerby (Mr. Houghton) in speech after speech in this House asking for a new administrative technique to be established to draw back from the successful business man the expenses which, in the view of the hon. Gentleman, he ought not to have been allowed. I think it is the view of hon. and right hon. Gentlemen opposite, therefore, that in some way equality must be achieved between the professional man, on the one hand, and the business man on the other who by these various devices escapes the consequences of high taxation.
We on this side of the Committee dissent on basic political and philosophic grounds from the view that we should indulge in more governmental devices, which involve the engagement of more civil servants, to pry into the fortunes of successful people. I am an unashamed capitalist. I think it is the only salvation for this country in the peculiar circumstances in which we find ourselves in the modern world. Therefore, we must work


the devices of capitalism and let men foster the way of life that goes with it and not try to suppress their activities all the time.
4.15 p.m.
But I am also for allowing some sort of equal standard of living and equal wealth to be attained by the professional man who from earliest days has sweated it out in school and university and relies upon his brains. We can all think of such a man, the doctor, the teacher, or, if one likes, the priest. These are the salaried technicians and administrators, the scientists, the lawyers, active and retired. Those are all those with little capital and those who are denied the expense allowance.
There is no doubt that under the undesirable social revolution which is taking place their standard of life is falling by comparison with the successful entrepreneur, the man of business. They are being trampled down by commerce. The way to correct this situation is not to strain after doubtful expense charges, as hon. and right hon. Gentlemen so often desire, but to reduce the weight of Income Tax and Surtax on the middle class and on the professional class. That would provide a platform upon which everybody could advance under conditions of equality.
I do not believe that the Treasury will ever do this. I have advanced this theory before and I cannot conceive, except under Parliamentary pressure, that any Crown authority will voluntarily, and out of its own good conscience, see this brought about. Only Parliament can do it, and on profound historical and constitutional parallels I believe that back benchers of all parties in this House who believe in this, and who want to see equality prevail amongst the professional classes, must act, and act now. It will then be up to the Chancellor of the Exchequer to collect in other ways the revenue which he must have.
If Parliament will only say, "We will not have this weight of direct taxation any more," then the Executive is able enough to devise other forms of taxation. Indeed, many forms have already been bruited, such as, for example, an expenditure tax on everybody. That would fall equally on the classes about which I am speaking. It would hit most those who spend most, whether they are magistrates

or film stars, bishops or captains of industry. I hope very much, therefore, that this moderate, reasonable and, on the figures on which we are working, inexpensive proposal will be the beginning of a Parliamentary campaign.

Mr. John Cronin: It has been agreeable to hear the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) moving his Amendment. All of us will agree, I think, that the noble Lord has some interesting economic views. Although there might not be a general feeling that they contain very profound thought or high intellectual content, they are certainly original. I give him full credit for that.
Fortunately, the views of the noble Lord are not particularly nocuous. For instance, they are not in the same category as the rather unhappy economic views of the Lord Privy Seal, which have been followed by disasters, and they do not cause the same Pandora's Box of ills as that which is being let loose by the present Chancellor of the Exchequer. Nevertheless, they are agreeable and stimulating to hear. I think the noble Lord made one very useful point—the rather unhappy position of the full-time salaried person compared with that of the entrepreneur. That is a very fair point to make, and it would be agreeable if that situation could be changed.
The noble Lord's suggestion that Surtax payers as a class should have substantial relief, which is the purpose of his Amendment, does not carry strong conviction, certainly not on this side of the Committee. There is a general feeling which one hears at social gatherings of a certain type or reads in the newspapers that Surtax payers have rather a hard deal. This idea, of course, emanates from the Surtax payers themselves, so that it is not entirely surprising that it exists, bearing in mind that to a large extent they control the various organs for propagating information and news.
If we analyse a few rather elementary facts about Surtax payers we find that they do not have nearly such a hard time as is indicated in some sources and that they do not need the assistance of the noble Lord's Amendment. It is a truism, of course, that Surtax payers belong to a rather privileged class in that obviously their capabilities of consumption, by reason of their incomes, must be high.


A person with more than £2,000 a year must do much better than a person with less than that. That is a truism, but it bears repetition.
There is another aspect of the Surtax payer's position—I am talking about Surtax payers in general—and it is that to a very large extent he is able to avoid the disagreeable effects of high taxation. It is well known that by virtue of their large incomes Surtax payers can take advantage of many forms of tax avoidance—and I say tax avoidance as opposed to tax evasion. The final Report of the Royal Commission on the Taxation of Profits and Income made some play of this point. For example, the Surtax payer can invest his money in some firm or some organisation which produces a considerable loss and yet at the same time can gain capital value, so that after a short time he can sell that capital asset and make a substantial tax-free profit.
That is the sort of avoidance which is obviously not open to people who have not large incomes. A typical and very common example is the purchase of farms. A man may buy a derelict farm, run it at a substantial loss for some years and then sell it at a substantial capital profit. That is a typical example of the Surtax payer's capacity to avoid taxation.
With the exception of the full-time salaried person—a proper exception which the noble Lord made—Surtax payers as a class can usually take full advantage of expenses. Practically the whole class of Surtax payers can obtain expenses for a wide variety of activities which in themselves are agreeable and add to their standard of living. A company director can entertain lavishly in a smart restaurant and recover a substantial tax rebate on his expenses, but there is no question of a coal miner obtaining any expenses which involve an agreeable sensation.

Mr. John Hall: Can the hon. Member tell me whether the miner pays tax on his concessionary coal?

Mr. Cronin: That is a fair point to put, but concessionary coal is surely an old-established practice in the industry.

Mr. Percy Shurmer: And the miner digs it himself.

Mr. Cronin: I do not know whether the hon. Member is suggesting that coal miners should be deprived of concessionary coal.

Mr. Hall: I was not suggesting anything. I was merely picking up the hon. Members own example and asking a question.

Mr. Cronin: The analogy seems some-what incomplete to me.

Mr. Geoffrey Stevens: Would the hon. Member allow another question? Do trade union officials ever entertain at the expense of anyone except themselves?

Mr. Cronin: I am very glad that that question has been raised, because if there is one glaring scandal in this country it is how grossly underpaid are trade union officials. [HON. MEMBERS; "Answer the question."] The answer is, "No."

Hon. Members: Rubbish.

Mr. Donald Chapman: Let supporters of the Government produce some evidence.

Mr. G. Lindgren: When hon. Members opposite go to the Savoy, whom do they see there?

Hon. Members: Other hon. Members.

Mr. Cronin: I fully appreciate that Surtax brings forth very strong emotions in the breasts of hon. Members opposite, but I must beg leave to continue with my argument.
Another very simple way of avoiding tax, of course, is some form of alienation of income by making a convenant which involves an ultimate profit to the person who makes it. In addition, Surtax payers obtain untaxed financial considerations by receiving large sums as ex gratia payments for various purposes. All these things are not available to people who do not pay Surtax, or are available to only a very small proportion of them.
There is, I suggest, another quite different aspect—that Surtax payers as a class usually do rather agreeable work. There are certain exceptions to that; I should not think that it is entirely agreeable to be a Conservative Chancellor of the Exchequer. Speaking generally,


however, Surtax payers have quite pleasant lives and occupations. It is much more agreeable to be a company director or a judge than to be hacking out coal in a 15-inch seam. That may be a wide example, but the analogy stands. If they had justice, Surtax payers ought to have their incomes decreased rather than increased on account of the agreeable nature of their work.
Another perhaps more fiscal argument which I beg to offer to the Committee is that if hon. Members consult this year's Financial Statement they will see that the Exchequer receipts from Surtax in 1955–56 were £138,600,000. On the opposite page—page 4—they will see that the interest and management of the National Debt cost this country roughly four or five times that—£637 million.
The Surtax payers' contribution, in Surtax, therefore comes to about only one-fourth or one-fifth of the money paid out to the National Debt. The importance of this lies in the question, who gets the money paid out for the operation of the National Debt? I suggest that a large proportion of the people who receive it are Surtax payers.

Mr. Angus Maude: The hon. Member must surely be aware that a very substantial part of that money goes to such institutions as insurance companies for the purpose of investing the life insurance premiums of quite small income earners. Trade unions invest their funds in precisely the same way, as do companies and all sorts of organisations and institutions. The hon. Member has no evidence at all for what he is saying.

Mr. Cronin: I am delighted to have that intervention from the hon. Member. I do not suggest that Surtax payers receive all the receipts of the National Debt. I suggest that they receive much more than they pay out in Surtax. I do not think that the hon. Member would suggest for a moment that Surtax payers receive less than one-quarter or one-fifth of the money paid on the National Debt.

4.30 p.m.

Mr. R. Gresham Cooke: Does not the hon. Gentleman agree that Surtax payers are already paying their full share of Income Tax, which goes towards relieving the debt?

Mr. Cronin: I assure the hon. Member that most of us on this side of the Committee are aware of these elementary points on taxation, but I do not see how they affect this general argument.
There are economic reasons why Surtax payers should not receive this relief. The first is that it does not prevent them in any substantial way from continuing to earn income. No doubt we shall hear a good deal about incentives from hon. Members opposite later on. I think that the Committee will perhaps agree that much of the work done by Surtax payers is of a vocational nature and that salary is not their first consideration. If the average Surtax payer has to give up some of his considerations for his work, he will still go on doing that work. No one will cease being a judge or cease being an actor because he has to pay more tax.
There are some hon. Members who will agree with me that Surtax is often an actual incentive in itself to people to work harder. It all depends on how much one values one's income. In general, I think it will be agreed that a Surtax payer, if he has a marginal portion of his income taken from him, will probably work all the harder to make up for the loss of that marginal portion.
On the question of incentive, quite often a Surtax payer, who feels that he does not want to go on working because a large part of his income is being taxed too severely, will devote himself to some equally valuable but less remunerative form of occupation. He may become a Member of Parliament, for example, or start a farm. He may do many useful and valuable things. He may work on committees of voluntary organisations.
Another important economic argument for not relieving the Surtax payer is the mere fact that a wealthy man knows that his income is being severely taxed and that induces him to go in for more hazardous financial ventures. He will be more likely to advance risk capital because he knows that he will get a tax-free capital profit if he is fortunate, and the reverse if he is unfortunate. Risk capital, which hon. Members opposite take so much to heart as being of importance, is much more likely to be produced by the person who is well paid and who knows that he is being severely taxed on the marginal amount of his income.
I do not want to take up too much time, but I fear that much of my time has been spent in answering interruptions. I think that the most unhappy aspect of the noble Lord's Amendment is its relevance in the present economic situation. It seems to me to be most peculiarly maladroit. Here we have the Chancellor telling us that we must have a savings Budget. He stumps the country and produces speeches which, I think, are of considerable value, as they indicate what is happening, and that we are rapidly approaching disaster. I am astonished that he is prepared to avow it so freely, but that may well be because he feels that the shortness of his tenure of office may shift the responsibility in other directions. I would not press that point.
In the present situation, I would ask hon. Members to remember what happened yesterday, when we were pressing for a very small consideration to be given to old-age pensioners on tobacco. That was quite ruthlessly turned down, yet in spite of that, hon. Members opposite are here in strength; I have rarely seen such a solid phalanx of hon. Members on the other side of the Committee during a debate on a Finance Bill. The noble Lord may well review his troops. They are here in strength to obtain a large financial concession for wealthy, and certainly less deserving, people.
I am sure that the Chancellor will not accept this Amendment, although it may to some extent go against the grain not to do so. It follows a very long-standing Conservative principle, which is best expressed in the rather homely words that one hears north of the Trent, "If you do owt for nowt, do it for thy sen."

Mr. Maude: I think everyone will be delighted to find that the hon. Member for Loughborough (Mr. Cronin) is to continue that strain of engaging eccentricity which we found so appealing in his beloved predecessor.
We have listened to a speech which displayed not merely the haziest conception of economics but an idea of the life of Surtax payers which seemed to be based on a cross between Karl Marx and "Peg's Paper." The hon. Member, like so many of his hon. Friends and colleagues, is clearly of that school which believes that on reaching an income of

£2,000 a year the average professional man enters that class of high society which launches its daughters immediately upon those parties whose principal feature is throwing champagne bottles at the river police. The truth, of course, is not so. An income of £2,000 a year to a family man in these days, a figure, which, if rumour is to be believed, is that which some hon. Members opposite deem appropriate to the salary of a Member of Parliament, is, to say the least of it, not quite what £2,000 a year was before the war.
I want to add only two points to those which my hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke) so cogently made. They are two points which I hope hon. Members opposite will bear in mind and to which, I hope, the Economic Secretary will address himself when he comes to reply to the debate.
Let us look for a moment at what is happening to the man with an income of, let us say, from £2,000 to £5,000 a year. As the cost of living goes up, which it has done pretty steadily since 1939, his income and salary, it is true, do not rise as fast as those in certain other classes of the community; but in so far as it does rise in order to keep up with the cost of living, let us look at what happens to it. At every point above £2,000 a year his income, which in real terms remains the same, if not smaller, has a progressively higher rate of taxation levied on every £1 of it. That is clearly a matter of economic injustice which goes far beyond the simple progressive system of taxation which was envisaged when this figure of £2,000 was first made part of the Surtax law.
Furthermore, it goes far beyond the ordinary process of redistribution of wealth, which is a part of that social revolution to which my noble Friend referred. When wages increase alongside the cost of living, it is perfectly true that there comes a point at which a wage earner begins to pay tax at the standard rate of 8s. 6d. in the £, but after that he continues to pay at the same standard rate for every increment of wages as the cost of living rises. That is not so with a salary of more than £2,000. The tax is then imposed at a higher rate in the £ every time there is an increase in salary of £500 a year.

Mr. Chapman: That is a big enough band for the hon. Gentleman, is it not?

Mr. Maude: The hon. Member must consider the fact that these increases do not always take place in blocks of £500 a year. I wish to goodness that they did. There comes a point when a man goes from one £500 band into the next, and the impact of tax on his salary becomes far greater than it does in the case of a wage earner getting an increase in wages. What is in fact happening is that the impact of Surtax on the salary earner is all the time reducing the effect of an increase in salary designed to offset the increase in the cost of living.
It is perfectly plain that if a starting point of £2,000 a year was fair and right before the war, or immediately after the war, it is not fair and right now. We are asking that, as a simple act of justice, this matter should be put right. I was glad that the hon. Member for Loughborough did not produce the argument so often produced by his hon. Friends when, for example, a Conservative Chancellor of the Exchequer has lowered the standard rate of Income Tax by 6d., without increasing the upper level of Surtax, that this concession would be bitterly resented, as they always put it, by the workers.
I have always found it difficult to accept the singularly unattractive picture of those whom they purport to represent which hon. Members opposite are always so willing to present to us, the picture of people who arc unwilling to permit a simple act of justice to others unless some concession is also given to them. I do not believe for a moment that a concession of this kind would be bitterly resented, because the figure of £2,000 for the beginning of Surtax is clearly out of date and has no relation whatever to the cost of living, the salary level, or level of taxation with which we have to contend nowadays.
I hope that the sort of speech which we have heard from the hon. Member for Loughborouh will not set the key note of the speeches from the other side of the Committee in this debate. We remember very well the line which Members of the Labour Party used to take in the years between 1946 and 1951 when they were in power and when the redistribution of income was proceeding

apace. Apparently it used to be a perpetual surprise to Members of the Labour Party to find that there were still people who had any substantial amount of money left to spend out of their salaries or income from investments.
4.45 p.m.
If they found that they could not get people of reasonable quality, for example, to serve on the boards of nationalised industries, they were prepared, rather unwillingly, to pay them substantial four-figure salaries. There was always the implication that if they had to pay that amount of money they jolly well saw that they got it all back. Even if, by some mischance, a substantial amount of money was left after tax, it seemed to be the aim of hon. Members opposite to ensure that there was nothing worth-while on which to spend the money.
We can remember that happening over and over again. There were always perfectly good reasons for it—they said there must be no holidays abroad, no independent schools, no private practice in the National Health Service and so on. There were always good reasons why these impositions should be made, but there was an air—I hesitate to say of sadism—at least of gusto in the enthusiasm with which these restrictions were always propounded.
Unless we realise on both sides of the Committee that, as long as we have an economy which is predominantly capitalist—not nowadays as predominantly capitalist as some of us would like —which at least purports to be based on the market, we must allow market incentives to operate. There is no more fantastic way of weakening them than by allowing salaries to be subject to a scale of Surtax starting at a level designed many years ago to cope with a totally different economic situation. I hope that my right hon. Friend the Chancellor will, as soon as he feels it economically possible in the circumstances of his Budgets to make this concession, give us some hope that he will do so.

Mr. Roy Jenkins: The hon. Member for Ealing, South (Mr. Maude) always addresses a close-knit argument to the Committee and his speech this afternoon was no exception. He and some of his hon. Friends, as occasionally in the past, do not act in the service of the cause of free enterprise, which is part of our


economy, if they link its survival, as he did towards the end of his speech, with sweeping reductions in direct taxation which are completely impossible for any Chancellor of the Exchequer to carry out.
I rather preferred the more philosophical and wide-ranging approach of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), though at one time his speech became almost strident. When he was addressing an argument to the Chancellor of the Exchequer he seemed to be making a bid for high office in a new organisation which the hon. Member for Lewisham, West (Mr. H. A. Price) is setting up. In the course of doing that the noble Lord addressed a number of very interesting arguments to the Committee.
I was surprised to hear him begin by offering an alliance to the Liberal Party, an offer which seemed to be received with dismay, because the Liberal Party has disappeared from the Committee. I see that the hon. Member for Huddersfield, West (Mr. Wade) has now entered the Chamber. The noble Lord began by making an offer of alliance to the Liberal Party on the basis of general support for Mr. Lloyd George's Budget of 1909. That is a somewhat belated conversion to the virtues of that Budget on the part of the noble Lord and his party and I am sorry that he did not tell us some of the remarks which his party made about that Budget when it was introduced and some of the treatment which it accorded it.
However, he went on to address a number of arguments slightly more pertinent to our present situation, but not many of them were arguments of very great force. One of his arguments was that high taxation on large salaries earned by up and coming people in the professional grades was inflationary, because inevitably salaries would be increased faster and faster. He instanced as an example the fact that in the last two years there had been very substantial increases in salaries in precisely this grade. But the last two years have been a period of reductions in direct taxation.
Surely the noble Lord will not take even that away from the Lord Privy Seal. Surely he will not suggest that the Lord Privy Seal has not done something to benefit people in this class. If he has, and if in the last two years there have

been reductions in taxation—not precisely in the form advocated by the noble Lord, but with broadly the same effect and with, I will not say as a consequence, but as a corollary, very sharp increases in the gross salaries of these people—I do not follow how the noble Lord comes to the conclusion that, in order to prevent salaries rising faster, we must have further reductions in direct taxation.
The noble Lord also dealt with some rather wider topics. I do not deny for a moment that Surtax, in its lower ranges, may bear rather heavily upon the married man, especially the one with no property but with a family. I am sorry that, from this point of view, the noble Lord swept away as being completely undesirable the scheme of a self-balancing adjustment in the burden of Surtax put forward by the Royal Commission. There is a great deal to be said for reducing the burden of Surtax upon the man with heavy family responsibilities within the sort of income bracket with which the noble Lord was dealing, but I do not see why the position cannot be remedied as the Royal Commission suggested, namely, by such an adjustment that the concession could be paid for—as all taxation concessions have to be paid for—by other people in roughly the same income bracket, but with rather less heavy responsibilities.

Viscount Hinchingbrooke: My objection to the proposal of the Royal Commission's scheme for Surtax was not that it produced reductions in tax for salaried men with family responsibilities. It did that, but it compensated for it by putting a new Surtax burden upon the single man, upon the principle that practically the same amount of revenue was required from Surtax. In fact, the net effect of their reductions was £1 million only.

Mr. Jenkins: Of course, and that is precisely the point with which I was dealing. The noble Lord sometimes sets himself up as the guardian of constitutional liberties, and I was surprised to hear him suggest that the Royal Commission would have done its job better if it had dealt not merely with the type of taxation, but with the general level of taxation which I should have thought was pre-eminently a job for a Chancellor of the Exchequer or a Government and quite wrong to entrust to a body like a Royal Commission. The noble Lord is willing to accept concessions provided that he


does not have to pay for them and that they are perfectly straightforward concessions that carry no disadvantages with them.
I thought that the same consideration applied to his concluding point, which was based upon the most powerful premise that he adduced in the course of his speech. He said that there is a big difference between Surtax payers who earn straightforward salaries and others who earn an income which, broadly speaking, is assessed under Schedule D. I agree. That is one of the things which is most worrying about our direct taxation structure at the moment. Rates of tax, although nominally the same, bear with nothing approaching the same degree of severity upon the taxpayer who happens to be assessed under Schedule D and the taxpayer who is assessed under Schedule E because of the entirely different system of dealing with expenses and, therefore, the entirely different relationship of taxable income to the spending power of the individual concerned.
The conclusion which the noble Lord drew from this was that it was impossible to produce a fair base of taxation, but nobody has been more consistent than he in previous years in resisting any attempts to make the base rather more fair—attempts which have been made in Amendments moved by my hon. Friend the Member for Sowerby (Mr. Houghton) and others. The reason which the noble Lord gave for being unable to consider an evening up of the position was that he is an unashamed believer in capitalism. He may be an unashamed believer in capitalism or anything else, but I do not see why that should prevent him from seeking to remedy a completely unfair taxation system as between two different classes of taxpayer.
I suggest that by the language he uses and the approach he makes to this problem the noble Lord does no service to those whose cause he is advocating. It is no good his suggesting that it is possible to make such sweeping reductions in direct taxation as to make the difference in the tax base a matter of comparative unimportance. His is a completely impracticable solution, as I think he recognised by saying at the end of his speech that this was something that no Chancellor of the Exchequer would accept. It is a totally impracticable suggestion.
Starting from the premise that there is great unfairness in the present tax base, I suggest that we should do very much better to look in the direction of making that tax base broader and fairer. If that were done, it might be possible to make certain direct reductions in the nominal rates of direct tax which would be of benefit to certain people in the category he defined who, I agree, suffer at the present time.

Mr. John Hall: I was glad to hear that the hon. Member for Stechford (Mr. Roy Jenkins) at least has sympathy for the professional classes and has offered his support to the recommendations of the Royal Commission. In that case, he may be prepared to support an Amendment in the name of some of my hon. Friends and myself designed to make the Surtax level flexible, so as to take account of varying responsibilities as between married and single men and earned and unearned income. I understand that it is in order to discuss that Amendment in the general debate upon the Amendment moved by my hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke).
The Amendments which we are discussing are long overdue, and they have been made necessary because of the destructive effect upon the middle range of incomes of the twin evils of inflation and taxation. Inflation has always been with us. The value of money has fallen inexorably throughout the centuries. Although it has sometimes appeared to have risen, that has generally proved to be an illusion. Successive Chancellors of the Exchequer have been constantly occupied with ensuring that our rather elastic economy does not become merely a stretch of the imagination. In the eighteenth century, Boswell was able to live the life of a fashionable man-about-town on about £200 a year, and in the nineteenth century, as students of Mrs. Beeton will probably know, it was possible to have a reasonably comfortable establishment on £500 a year. When Surtax was imposed at its present level of £2,000 in 1907, any possessor of that income could be regarded as reasonably wealthy, and even in 1938, £2,000 a year was not a bad income.
What is the position today? In February of this year, I put down some Questions to my right hon. Friend in order to ascertain the difference between the


value of £2,000 in 1938 and its present value, and I was informed that £2,000 a year today was the equivalent in purchasing power of £633 in 1938. Today, an income of £633 a year would not be regarded as that of a wealthy man. To have the same purchasing power today as a man earning £2,000 a year had in 1938, one would have to earn £12,200 a year, and if a man earned £3,000 a year in 1938 he would require to earn £34,600 today in order to have the same purchasing power. In the "500-dollar" Question, I asked my right hon. Friend the Chancellor what his salary would have to be today to give him the same purchasing power as his predecessor enjoyed, with the same salary, in 1938. and I was staggered to be told that he would need £75,000 a year. If the present Chancellor is not worth £75,000, I wonder at what rate we should pay his predecessors in office in the previous Government? Apart from the fall in the value of the £, the main contributory factor to the reduction in the value of income has been the savage incidence of Surtax.

5.0 p.m.

Mr. Harold Wilson: I hope the hon. Member will realise that, on hardship grounds, we on this side of the Committee are not proposing that the present Chancellor should be paid by results—at any rate, we want him to live. Nevertheless, will not the hon. Gentleman realise that the figures he has been quoting and which we have followed with the greatest interest—I am sure that they are genuine and could be supported—are figures which we hope will be reported to the Chancellor in the strongest possible terms when once again the right hon. Gentleman is considering the salaries of hon. Members of this House?

Mr. Hall: I share the hope of the right hon. Gentleman.
People earning up to £2,000 are in a better position to cushion themselves against inflation and the rising cost of living by demanding, and in most cases receiving, increases of wages and salaries which enable them to keep up with the rate of inflation; although when the salary rises it becomes more difficult to maintain those increases at the same rate as the inflationary trend from which we have suffered over the past 20 years or

so. However, it is interesting to see that the average industrial wage, or I should say earnings, has been rising higher than the cost of living. The purchasing power of average industrial earnings rose by 16 per cent. between April, 1951, and April, 1955. There we have an example where at least wage and salary earnings have to some extent kept pace with and even exceeded the rising graph of inflation. But the higher the salary, the more a man receives over £2,000, the more difficult it becomes for him to keep pace with increasing inflation. The more that man tries to compensate himself for the fall in the value of his income, the greater is the impact of increased taxation.
I think it was Benjamin Franklin who said:
Only two things in this life are certain—death and taxes.
What the average Surtax payer complains about is that they do not come in that order. It is not always realised by those who do not pay Surtax that the earned income allowance and the personal and child allowances are not allowed for Surtax as they are for Income Tax. I do not think it is realised that the effective increase in the rate between £2,000 and £2,500 is not between 8s. 6d. and 10s. 6d., but is an increase from 6s. 7d. to 10s. 6d., a difference of 3s. 11d. For every £under £2,000 there is a relief of two-ninths on earned income, whereas over £2,000 that relief does not apply.
It used to be argued that there was no reason at all to help any man earning £2,000 a year or more; that, after all, many wage earners who receive far less would be delighted to be earning that amount, and therefore a man earning £2,000 a year who found life difficult should reduce his standard of living. I have heard that argument advanced many times, but I do not think that it is advanced any more. It is now realised that a labourer is worthy of his hire and that if we want to recruit able men we should be able to reward them adequately. But how are we to reward ability when increased taxation diminishes that reward?
Consider the position of the senior Service officers. Recently there have been generous increases in Service pay, but many senior officers have found themselves in a tax bracket which more than halves the additional benefit they thought


they would receive. Consider the recommendations of the Herbert Report, which says that we must pay more to attract outstanding men to serve on the boards of nationalised industries. How do we propose to make the rewards worth while? What is to be the difference in the real net value to a man who is to get perhaps £6,000 or £7,000 a year against a present salary of £4,000 or £5,000 a year? If we take a range between £6,000 and £8,000, the average earner of that amount receives 5s. for every £ he earns. Is that how we shall attract oustanding men to the nationalised industries?

Mr. Chapman: If the hon. Gentleman looks at the Report of the Commissioners of Inland Revenue, he will find that a single man earning £6,000 after tax retains £3,100 and on £8,000 he retains £4,700.

Mr. Hall: Every £ he earns over £6,000 is diminished by 15s. in the £, and that is no incentive whatever.
One other interesting fact which has a relation is that the present level of £2,000 which, as the Royal Commission pointed out, is not supported by any valid principle, is producing an immobility in top class labour in this country. One of my jobs, for my sins, is to try to find able senior executives for some of the companies with which I am professionally connected, men who are employed at a salary which I personally have not the time to earn. A great difficulty is that when we try to encourage a man, already earning over £2,000, to move to another job in another area, we can offer him little to compensate for changing his home and moving from one neighbourhood to another, because the amount he gets in every £ is too little. He desires a definite net addition to his income, and we have to give him a salary out of line with the real value of the job, which upsets the whole salary structure and adds considerably to production costs.
Furthermore, anyone engaged in business and trying day by day to find men to fill jobs will know that so many of our really able younger men are going abroad to other countries where they think they can get an adequate reward for their work. One can see the reaction to the Surtax level going far beyond the

confines of this country as in the reaction to Clause 9 of this Bill. It will be difficult for foreign companies to send top executives to this country if they are to suffer the savage and penal effect of Surtax that we ourselves are suffering. Despite the remarks of the hon. Member for Loughborough (Mr. Cronin)—I am sorry is not at present in the Chamber—I think it true to say that Surtax at present levels is destroying incentive and enthusiasm in a large section of the middle-classes, which includes the top-ranking professional and executive classes from which we draw our leaders. Do not let us forget also that these are the traditional savers in the country.

Mr. Arthur Moyle: What about the workers? Are not they traditional savers?

Mr. Hall: If the hon. Member wants support for what I have said, I recommend him to read the Report of the Royal Commission, which refers to the fact that the greater part of private savings has come from those with the big incomes.

Mr. Moyle: Why does the hon. Gentleman confuse counsel by bringing in an irrelevant argument? When my hon. Friend the Member for Loughborough was speaking, he intervened and brought in the question of concessionary coal to miners. What has that to do with the case he is now advancing?

Mr. Hall: I am not sure that I introduced into my own speech any reference to miners, and my reference in an interjection in the speech of his hon. Friend was because his hon. Friend used the miners as an example when speaking of company directors and the question of tax-free expenses and emoluments.
May I now continue my speech? I wish to read this extract from The Times of 27th February of this year. It states:
What do the middle classes need for their rehabilitation and how can the Government help them? For the lower ranks the first need is an end of inflation. In the inflationary race they are nearly always left behind. For the higher ranks the urgent need is that the point at which Surtax begins and earned income relief ends should he pushed well beyond its present £2,000—£2,025 level. The idea"—
and here The Times quotes a figure with which I do not agree, as it is different


from the figure given me by the Chancellor—
that the man earning £800 in pre-war terms and £2,000 now is really rich and taxable as such is something quite new in Britain's tax philosophy. It is about at this level, more-over, that the wider responsibilities of a professional position begin to be heavy enough to need some of the personal and family freedom which goes with a modicum of domestic service—a privilege often out of the question now.
The Times leader goes on to say:
Virtually nothing has been done for the upper ranges—the small and middling Surtax payers.
That is the class with which I am mainly concerned—
Their plight is a special case of its own. The passage of four normal Conservative Budgets with little relief for the middle class anywhere and practically none for its upper ranges has left a feeling of hopelessness. If relief is not given by a Conservative Government, will it ever be given?
Yet the Government may be making a profound error of omission. A fairer deal for the middle class would be for the good of the nation.
My Amendment, which we are discussing with that in the name of my noble Friend, is perhaps rather more modest than his, and perhaps also a little more flexible. By continuing the existing allowances—the earned income allowance, the marriage and personal allowances and the children's allowance—into the range of Surtax, we could make it possible for the Surtax level to vary with the responsibilities of the individual. For example, if we take the case of a single man whose income is wholly earned, his Surtax level would start at £2,590, and, if his income was unearned, £2,140. In the case of a married man with an earned income but no children, the Surtax level would start at £2,690, and, in the case of a married man with two children, which is the average family, it would start at £2,890. My Amendment would not preclude the raising of the Surtax level at any time.
It is argued, and it will be argued by my right hon. Friend, that the Amendment moved by my noble Friend is contrary to his present policy—that it is contrary to the policy of giving no tax reliefs at the present moment and of encouraging savings. I should like to stress that if we want savings we have to make it possible to save. If we want

greater and more efficient output, we must give fair rewards to those who carry the main managerial and technical responsibilities. If we want to secure the lead in the technological race in which the major Powers of the world are now engaged, we have to be sure that our best scientists and engineers are not attracted to other countries where pay is higher and tax lower.
We have developed a system of taxation by taking money from the people so that giving part of it back again seems like a gift. The proposal in this Amendment is not a gift. It represents the very barest justice to a class of people which the nation cannot afford to discourage. I hope the Committee will forgive a slight incursion into Roman history. It is said from time to time that we are going the same way as the Roman Empire, though I myself have never believed it. There is, however, one point of parallel which is of interest.
Rome became an easy prey to the barbarians, partly because high taxation played its part in destroying its middle classes. There is no doubt at all that its government, its trade, its art and its spirit were decayed as a result long before the barbarian onslaught, and that made it impossible for the Romans to resist the attacks when they came. We are on the way to destroying our middle classes now, and, although this particular Amendment deals with only one section of the middle classes, the question is not whether we can afford to accept the Amendment, but whether we can afford to reject it.

5.15 p.m.

Mr. Douglas Jay: This is strictly a debate on Surtax rather than on the Roman Empire, on which subject I personally think the hon. Member for Wycombe (Mr. John Hall) is misinformed. Therefore, I think it might be better to leave general arguments about direct taxation in all its bearings to the discussion on the Question, That the Clause stand part of the Bill, and to stick strictly to the question of Surtax in the present debate.
It seemed to me that the noble Lord the hon. Member for Dorset, South (Viscount Hinchingbrooke) was suffering from a sort of nostalgia for the distribution of wealth in 1910. Indeed, he has suffered from that nostalgia before. I thought the main new element in his speech today


was that he seemed to describe it as equality. I found rather the same nostalgia, plus certainly a larger number of figures than arguments, in the noble Lord's speech. I really was not very clear at the end of it why he thinks it is a good thing that the Surtax level should be increased beyond the figure of £2,000. Of course, the noble Lord may be saying—and this was certainly said by the hon. Member for Ealing, South (Mr. Maude) and by the hon. Member for Wycombe—that this ought to be done because money values have decreased in recent years. The value of the £ sterling, we are all agreed, has gone down, and therefore it may be said that the present level of £2,000 is entirely out of date.
If that is the main argument, then I do not think this is the first priority among the resulting changes that ought to be made in our direct taxation system. If we are to change the system because of the change in the value of money, the first priority should be to exempt altogether a number of the smallest Income Tax-payers. If we are to concede, or to give away, to use the Lord Privy Seal's words, £25 million, which is the extra cost of the noble Lord's concession, or, on some other basis, £41 million, the first priority is to use that figure for exemptions further down the scale.
Secondly, it may be argued that this should be done, not on the grounds of money value, but on grounds of greater equality between one taxpayer and another. If the noble Lord had proposed the alterations in Surtax which he described but did not endorse, but which the Royal Commission proposed, then in my opinion his argument would have been very much stronger. The Royal Commission, in that proposal, wanted to vary the minimum level of Surtax according to the number of dependants in the family and to give an increased child allowance at the same time, which on grounds of equity, has very much more to be said for it than the simple change which the noble Lord is proposing. It is quite true that in France the taxation system takes far more account of the number of persons and not just the single figure of earnings in the household, and it is obviously more equitable that it should be so. The question where what the late Mr. Lloyd-George, as he then was, called the "level of gentility" begins now depends just as much on the

number of dependants as on the size of the gross income. If the noble Lord had made his proposal in that form, we should have been much more sympathetic to it.
Thirdly, this case could he argued on grounds of incentives and the alleged injurious effect on incentive and effort which Surtax is supposed to be producing. I noticed with some interest that the noble Lord did not put that case with much force or conviction; nor did any hon. Member opposite until we came to the hon. Member for Wycombe who, while he at any rate did state it, in my opinion grossly over-stated it.
Perhaps the reason why hon. Members opposite have become more cool about this argument is that it was decisively rejected by the Report of the Royal Commission, and, since the hon. Member for Wycombe put this argument so fiercely and also quoted the Royal Commission on other points, I should like to draw his attention to what the Royal Commission said. After all, this Commission included men like Lord Radcliffe, Sir Geoffrey Heyworth, Mr. Millard Tucker and others, who would not be particularly prejudiced in favour of the arguments which we normally put from this side of the House.

Viscount Hinchingbrooke: Obviously, they would have to reach over backwards in order to get the assent of some Members who support the policy of the party opposite.

Mr. Jay: I am quite sure that the noble Lord would not expect them to put in their Report anything they did not believe. I am sure the noble Lord did not mean that. Having said that it was generally alleged that taxation had a disincentive effect, the Commission, in paragraph 149, went on as follows:
But if we are asked to infer from this that the heavy rates have any special disincentive effect upon the receivers of the higher levels of income, so as to justify a shifting of the existing weight of taxation from these ranges to lower levels of income, we are bound to reply that we see no evidence that the higher income-earners are specially affected by disincentive.

Mr. John Hall: Up till recently that has been fairly true, because, as the hon. Member for Loughborough (Mr. Cronin) pointed out, those in the higher grades seem to be conscientious and to have a sense of vocation. That still does not take away the tremendous injustice of


imposing upon that sense of vocation and conscientiousness. Today, however, these two conditioning factors are not operating to the same extent as diminishing income, and economic pressure leads them to search for higher incomes.

Mr. Jay: If the hon. Gentleman shifts his argument from incentive to injustice, that is an altogether different matter. Since he has interrupted me and is arguing in that way, let me read a little further from paragraph 149 of this Second Report:
In the meantime we should not conclude, either from our own observations or from such evidence as we could extract, that the high managerial post, for instance, is declined because its rewards are not thought worth obtaining or that the artist or the professional man abates his energies because tax has made it not worth while that he should exercise them to the full.
We must all pay a great deal of attention to what the Royal Commission, an impartial and authoritative body, said on this important point.
On the question of incentive, I would like to know whether the Government take the view which we have heard from the hon. Member for Wycombe. We had a rather extraordinary speech from a member of the Government, the Minister of State for Colonial Affairs, in the North of England the other day. He said that it was the policy of the Government to increase incentives for those in the Surtax class but to support all action to arrest wage increases among the wage earners. I ask the Economic Secretary whether that is the policy of the Government and whether the Minister of State for Colonial Affairs was speaking out of tune on that occasion.
On this side of the Committee, we believe that the £2,000-a-year limit is not something to which we are eternally wedded regardless of the number of de-dendants in the family or whether the income is earned or unearned. The hon. Member for Wycombe was on much stronger ground when he was arguing in favour of the Amendment which has not been called and which would have made an increased differentiation between earned and unearned income in the Surtax class. That is important, because the Annual Report of the Inland Revenue shows that from £2,000 a year upwards very nearly half of the total income is still unearned to this day. That is a

very much higher proportion than we find in the lower levels of income. It is therefore rather important, when we are discussing Surtax, to know whether it is a question of taxing earned or unearned income. The first priority is not to consider simply the raising of the £2,000-a-year limit.
We believe that there is still a great deal of tax avoidance in these Surtax grades. A little earlier, one of my hon. Friends quoted evidence of the fact, which has always impressed me, that the yield of Surtax has not increased in the last 15 years by anything like what one would have expected, taking into account the increase in the national income over those years.
On the other hand, Mr. Kaldor, in his book about the Expenditure Tax, which the noble Lord the Member for Dorset, South seemed to be supporting, if I understood aright, said:
Despite the extremely sharp increase in surtax rates, which amounted to 46 per cent. as compared with pre-war (a higher percentage increase than in the case of Income Tax) and an almost threefold rise in the national income, the total revenue from surtax only rose from £59 million in 1938 to £130 million in 1953.
That suggests that there is very considerable avoidance. I know the Economic Secretary attempted to reply to that point that it was not due to avoidance but was evidence of the great redistribution of income that had cut down the size and the number of the incomes of £2,000 a year and upwards, but I would like to know what evidence there is for taking that view other than the figures of Surtax incomes themselves in the returns to the Inland Revenue.
If the hon. Gentleman were to say that most of the expensive hotels in the West End were closing down, or produce some other evidence of the shift of real incomes and purchasing power, it would be conclusive, but at present we have no evidence except that the incomes, as returned to the Inland Revenue, are not as high as we would expect them to be. Therefore, if we are to tackle this problem, the first priority should be to tackle evasion before we talk about reducing the rates of tax.

Mr. John Arbuthnot: The right hon. Member for Battersea, North (Mr. Jay) said that he could not see any reason for increasing the level at which


Surtax starts. I would suggest that there are two fundamental reasons. The first was accepted by my right hon. Friend the Lord Privy Seal when he was Chancellor and was supported by hon. Gentlemen on both sides of the Committee, since there was no Division against it.
Dealing with the question of Estate Duty, the Lord Privy Seal pointed out that it required at least £3,000 now to provide the equivalent value of £2,000 before the war. He therefore raised the level at which Estate Duty started from £2,000 to £3,000. What is reasonable and practicable for Estate Duty should also be followed for Surtax, and is the first fundamental reason why the Surtax level should be raised.
The second reason is that it is extremely difficult today to reward a higher executive sufficiently for taking greater responsibility or to reward him for moving from one place of residence to another. It is difficult to provide these rewards as many of us find in our business activities. As my hon. Friend the Member for Wycombe (Mr. John Hall) has said, the question we have to consider today is not whether we can make this concession, but whether we can afford not to do so.
5.30 p.m.
I think it is worth while considering now the best way in which the problem should be dealt with. I am astonished at the modesty of the proposals of my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke). I do not think he goes nearly far enough. The proposals put forward by my hon. Friends and myself in the two Amendments to which we have signed go considerably further. I am glad to find that the hon. Member for Stechford (Mr. Roy Jenkins) and the right hon. Member for Battersea, South are in agreement in feeling that there is a stronger case for giving additional personal reliefs and earned income allowances than for the raising of the bottom level at which Surtax begins.
The amendments which I feel are most important are, first of all, that the personal reliefs should be taken into account for Surtax, including children's allowance, since the level at which Surtax begins bears most hardly on the married man and especially on the married man with children. If the proposals which my hon.

Friends and I have put forward were brought into effect they would mean, taking the case of a married man with two children, that allowance would be made before Surtax was payable, first of £240 for the personal allowance for himself and his wife and then of £200 for the two children, followed by earned income relief at two-ninths, which would be £450, making a total of £890. Over and above that, if the level at which Surtax began was raised from £2,000 to £2,500, it would give a relief which would take into account the special responsibilities of the married man with children. We feel that would do a greater justice to those people who are in difficult circumstances today.

Mr. Chapman: I think one of the most interesting misapprehensions which have run through this short debate, particularly in the minds of hon. Members opposite, is that here we are dealing with the middle class. We have been taken back to Lloyd George by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) and back to Ancient Rome by the hon. Member for Wycombe (Mr. John Hall) on the assumption that here we are dealing with a considerable number of taxpayers who form the middle and upper ranks in our society.
The most important fact we have to realise is that the total number of tax-payers who pay Surtax in our community is only a quarter of a million out of a total of 20 million income earners. Let us first debunk the idea that Surtax in some way hits what we broadly call the middle classes. if only a quarter of a million of them are paying it I cannot see how the definition of middle class can be so narrowly drawn as to include only them.
The second thing which is most interesting is that on this side of the Committee there is an understanding that there is some problem in the £2,000 to £3,000 per annum range. I say this in all friendliness to the noble Lord. I do not think he will get any hon. Member on this side of the Committee to be interested in what happens to those beyond the range of £3,000 gross income, but there is some interest in what happens to the family man who has educational and other family responsibilities and a gross income of between £2,000 and £3,000 a year.
Of the quarter of a million who pay Surtax, only 125,000 only half—come into that £2,000–£3,000 range. Here I might be tempted to say what a wonderful definition that is of the middle classes in our society if it amounts to only 125,000 of the community. We admit that there is a problem in that range of income for many people, but I want the Committee to look even further into that figure before it starts making concessions in the way the noble Lord has advocated. If of that 125,000 whom we want to help the noble Lord looks at the number who have two or three children—those are the only persons for whom we on this side have any sympathy—he will find that the number is only 30,000 or 40,000. It is totally ridiculous in the view of hon. Members on this side of the Committee to advocate, as the noble Lord has advocated, a tax concession totalling something like £25 million or £30 million to help that small number of people-30,000 or 40,000 in our community.

Sir Peter Roberts: One thing which encourages me to support the argument put from this side of the Committee is the question of incentive. A vast number of people are hoping to gain through their own efforts by getting into this range.

Mr. Chapman: I do not object to that and I will answer the point before going further. The simple answer is that if the hon. Member will look at the point at which they pay when they come into this range he will see that by the time they reach £2,500 they will be paying only £50 per year and by the time they reach £3,000 they will be paying only £112 a year, whereas the real disincentive has come, not with Surtax, but with a huge jump in Income Tax payments. Whilst they are paying £50 or £112 in Surtax, their Income Tax is going up from £520 to £750 and £975.
Hon. Members opposite cannot pathetically point a finger at Surtax and say that it is the cause of the worries of the family man in the £2,000 to £3,000 range. It is Income Tax which hits him most and, when it is narrowed down, we find that it hits a very small proportion of Surtax payers. It would be ridiculous to make this concession to help that very small number.

Viscount Hinchingbrooke: The hon. Member is, perhaps mistakenly, muddling my Amendment with the Amendment in the name of my hon. Friend the Member for Wycombe (Mr. John Hall). I gave the figures of £25 million and £4I million and my Amendment deals with the Surtax payer apart altogether from children. The Amendment in the name of my hon. Friend mentions children, but he did not mention those figures.

Mr. Chapman: The noble Lord could not have been listening when I said that if in his plea for all Surtax payers he wanted sympathy from this side of the Committee he would have to seek it for the family man in the £2,000 to £3,000 range.
If hon. Members opposite look up the Report of the Commissioners of Inland Revenue they will find that even in that £2,000 to £3,000 range there is something like at least 25 per cent. of Surtax payers who obtain a very substantial part of their income from unearned income. It is just not true that those are men in managerial positions in industry, totalling huge numbers, who are being penalised. A large number of them are very largely dependent on unearned income for getting into that income bracket. If hon. Members opposite will look at the number of people they are trying to help and to get sympathy for and will look at the proper way of helping them, they will find that it is ludicrous to take this huge amount of Surtax and relieve all the Surtax payers in order to help that small minority.
This is a most fantastic Budget in which to start to give this kind of concession. The other day I read in a national newspaper the budget of a married man bringing up a small child and trying to run a car and buy a house on £7 19s. a week. His total outlay on groceries for the three was £1 2s. 6d. a week. His outlay on meat was 6s. 6d. a week. Hon. Members opposite often spend more than that on themselves for one meal. [HON. MEMBERS: "Hon. Members opposite do so too."] We are all in the same boat in that respect. The Chancellor is appealing to that man not to start wage demands. That man is being told that in the interest of the whole community he has now reached a plateau. I should think it is a plateau of half-misery. He is told to wait a year before making a wage demand.
If a message went out from the House of Commons that we chose this year to make such a concession to a vast number of Surtax payers in order to help a very small minority of their number I should like to know what effect it would have on wage demands during the coming twelve months.

Viscount Hinchingbrooke: None at all.

Mr. Chapman: The noble Lord says, "None at all." He must think that the trade union leaders in charge of wage negotiations never keep their eye on what goes on in the House of Commons. I can tell him that if he sent out a message from the House of Commons to the effect that in this year, when everybody else is being penalised, Surtax payers are to get substantial concessions, it would be another one of those last straws which would let go another round of wage demands in the next twelve months.
It is not only silly and ludicrous to try to help a small number in this way; it is also very dangerous indeed to choose this year and this moment to attempt it.

The Economic Secretary to the Treasury (Sir Edward Boyle): We have had an extremely interesting debate. I am sure the whole Committee is indebted to my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) both for tabling his Amendment and for his very thoughtful speech.
I was a shade surprised to hear at the conclusion of my noble Friend's speech what he had to say about Mr. Kaldor's proposals. If he reads again the last chapter of his very interesting book, he will see that Mr. Kaldor's proposals, as Mr. Kaldor himself admits, bear an implication which is very far from moderate though they certainly open up most interesting vistas.
My noble Friend's speech was followed by a most remarkable speech by the hon. Member for Loughborough (Mr. Cronin), who introduced us to a new economic term which so far very few of us have heard, "the elasticity of demand for income in terms of leisure." This slightly reminded me of Mr. Balogh's famous description of direction of labour as "an intelligent discriminatory influence on employers' hiring policy."
I would say to the hon. Member for Loughborough that I hope we shall not

get into the habit of talking too much of Surtax payers as a class. That wise man, John Sedley, at the time of the Civil War in the seventeenth century, remarked, "There is this king and that king. There is no class of king." That is a very true remark. There are all kinds of Surtax payers with all sorts of positions and all sorts of personal problems.
I do not think we need apologise in any way this afternoon for having devoted particular attention to the problems of those in managerial positions who play such a big part in our society. My hon. Friend the Member for Ealing, South (Mr. Maude), who made a most thoughtful speech, made a point which is extremely valid, that it is very much harder for salary earners to maintain their position in real terms than it is for wage earners. My hon. Friend conclusively made his point upon that.
5.45 p.m.
The hon. Member for Stechford (Mr. Roy Jenkins) said that we must not link private enterprise to sweeping reductions in direct taxation. When the hon. Member was speaking, there were moments when I was a little reminded of a remark which my right hon. Friend the present Secretary of State for Air once made about the right hon. Member for Bishop Auckland (Mr. Dalton). My right hon. Friend said that the right hon. Member for Bishop Auckland seemed to think that the way to run the capitalist system was to roast half the chicken and then tell the other half that it must lay more eggs.
I should not have thought there was any great dispute about the fact that the very high level of taxation is a serious matter, not least for those in managerial positions. I was this afternoon again looking at a quotation, not from an hon. Member, but from a supporter of hon. Gentlemen opposite, Mr. A. F. Shumacher. Many years ago he contributed a very interesting essay on the subject of public finance to a book on full employment. I have quoted it previously. In the article he wrote:
The more progressive the scales of taxation, the smaller at the same time is the reward obtainable by business men for extra effort and risk taking, and in a free society the limits of taxation deserve the closest study.
That is certainly the view on this side of the Committee.
I think it fair to say that throughout the country at the moment, and by no means least on the Opposition benches, a great deal of attention is given to the importance of having a high rate of productive investment. It is no good going all out for a high rate of productive investment if one is to penalise all managers by an excessive rate of taxation. I would again mention Mr. Balogh, because he gives us the benefit of his views rather often in one forum or another. It strikes me as rather absurd to say, as he did in the New Statesmen recently, that on the one hand we should try to double our rate of prime productive investment and at the same time aim at a Budget surplus of £1,000 million. These two ideals do not tie up. If we are to go out for increasing wealth in this country we must pay very careful attention to the limits of direct taxation.
The right hon. Member for Battersea, North (Mr. Jay) referred to incentives and also spoke about Mr. Kaldor's calculations showing what the yield of Surtax should be. I thought that when speaking on the Second Reading of the Finance Bill I pointed out conclusively that neither the earned incomes nor the unearned incomes of Surtax payers had advanced between 1938 and 1952 anything like as fast as the national income. That was the basically false assumption on which Mr. Kaldor's model calculation was made.

Mr. Jay: Are not the figures of Surtax income quoted by the hon. Gentleman those returned by the taxpayers to the Inland Revenue? Is no evidence to be gained from that?

Sir E. Boyle: The right hon. Gentleman is wrong about this. Nearly half the Surtax paying incomes are from investment, whereas the national income has risen threefold. The national income figures show an increase of about 40 per cent. only in rents, dividends and interest going to personal income. That is a fact.
Secondly, apart from the use of Inland Revenue figures, the Priestley Commission, after studying incomes in industry, put the increase for the higher grades of the Civil Service at less than double pre-war. There is plenty of evidence here, and that of the Royal Commission on the Civil Service is fairly conclusive.

There is evidence without using the returns of Surtax payers themselves.

Mr. Jay: As the Surtax figures have risen, surely incomes should have been increased to more than double.

Sir E. Boyle: I pointed out on Second Reading that, if one is to bring in these considerations, there are many on the other side. Do not let us forget the Special Investment Contribution of Sir Stafford Cripps, which is important when calculating this kind of figure.
My noble Friend pointed out that the Amendment would involve a good deal of money. It would cost £27 million in a full year if the income above £3,000 continued to bear the same rates of Surtax as at present, but if the current rates of Surtax above £2,000 were applied to the corresponding slices of income above the proposed new limit of £3,000—which I think was the idea in my noble Friend's mind—the cost would be greater still. It would be as much as £46 million. I am sure that my noble Friend will be the first to recognise that to grant so big a relief to Surtax payers this year would be inconsistent with my right hon. Friend's decision that in the circumstances of this year's Budget there cannot be any general tax reliefs. There have been, in fact, some increases in taxation.
Furthermore, when we are looking at this question it is important to take into account what has been said by the Royal Commission on the Taxation of Profits and Income. In its second Report, which dealt with personal taxation, the Royal Commission went at some length into the question of the Surtax starting point. It did not, of course, recommend any general increase in the Surtax exemption limit, but did most certainly think that the present graduation of tax tended to over-rate, in the middle and upper income ranges, the taxable capacity of the family man as compared with that of the taxpayer without dependants.
In that connection the Royal Commission made two recommendations. In the first place, referring to Income Tax—which does not strictly arise on this Amendment—it suggested that the Income Tax child allowance should be graduated. Secondly, as was referred to,


I think, by the hon. Member for Stechford, it made the suggestion that instead of a uniform starting point of £2,000 for Surtax there should be variable starting points for Surtax liability, by which single persons would start paying it at £1,500, childless people at £2,000, as at present, and that those reliefs should be increased to £160, the suggested figure for child allowance. I mention that here as being among the considerations which my right hon. Friend would clearly like to think over very carefully.
I have a certain degree of sympathy with the hon. Member for Stechford. I think it is arguable that there is room in some part of our tax system for, as it were, redistribution within groups of people of the same income. At any rate, we would not rule that out dogmatically, although my right hon. Friend will pay careful attention to what my noble Friend had to say. A more important point, perhaps, is the argument that an increase in the starting point of Surtax would give an increased incentive to the managerial and professional class.
I think that I have already said enough to show the Government's sympathy with my noble Friend's objective here. At the same time, one has to consider what is the best way to achieve this objective. As I think a number of hon. Members have pointed out, an increase in the Surtax starting point would give relief to all Surtax payers, no matter whether their income was derived from earnings or from investments or from a mixture of both. Therefore, the Surtax payer living on earned income and the Surtax payer living on investment income would, assuming that their incomes were equal, both derive equal benefit from my noble Friend's proposal.
Obviously one would have to think over very carefully what is the best thing to do. It is very arguable. It might be better, as a possible means of giving special help to the managerial and professional classes, to do what was suggested by the Royal Commission. The Royal Commission thought that the two-ninths earned income relief in respect of Income Tax should be extended higher up the scale Here, again, there are many great possibilities.
While, therefore, my right hon. Friend has the greatest sympathy with my noble Friend's general line that we should aim

to give increased incentive to the managerial and professional classes, we will obviously want to think very carefully about the best means of doing this when economic circumstances allow. It is very nice indeed to think this afternoon about possibilities of tax reliefs, and we certainly want to consider very carefully the burden of taxation on individuals in our society at the present time. Obviously, there is no greater service we can do for the middle classes than to halt the rise in the cost of living. No greater service can be done for those on fixed incomes than to stabilise the real value of the money they already get. That is the great object of my right hon. Friend's Budget, and it is on that that his Budget and his policy will be judged.

Mr. Moyle: The advocacy by the noble Lord the hon. Member for Dorset, South (Viscount Hinchingbrooke) and other hon. Members of this Amendment appears to make some peculiar claim that those whom they say are covered by its provisions are suffering greater hardships as the result of our existing levels of taxation than are other sections of the community. From the Front Bench this afternoon we have gathered that the tax concession proposed would cost about £25 million a year. Not a single speech made in support of the Amendment has told the Chancellor who is going to pay for this tax concession, although hon. Members opposite must know that such a concession cannot be made without other sections of the community having to foot the bill.
It is very significant that while this Amendment has been discussed we have had, relatively speaking, a full House, notwithstanding the fact that the noble Lord and his hon. Friends have had the temerity to ask the Chancellor of the Exchequer, despite the adversities in which this nation is involved, to relieve one section of the population of about £25 million of taxation. I recall that on Tuesday, when we discussed the proposal to retain the tobacco concession for the old-age pensioners—the cost of which, I understand, was estimated at about £2¼ million a year—there was not at all the same enthusiasm displayed as has been shown on this occasion today from the benches opposite.
Why is that? I think I know. If I may say so quite frankly, they are


actuated by—and I am not complaining about it—the thought that in this advocacy on behalf of what they call the middle classes they have a sound party political advantage. I say at once that I am delighted at this belated enthusiasm of the Tory Party for the middle classes. It certainly is belated enthusiasm. I have spent part of my lifetime trying to get the middle classes to identify themselves with the workers, because I have always held the view, and still hold it, that had they had the good sense to identify themselves with the working classes they would have had a far better deal than they have ever had as a result of allying themselves with the class of people whom the noble Lord represents, if I may say so, very ably indeed.

Viscount Hinchingbrooke: Whom does the hon. Member mean?

Mr. Moyle: If I may say so, this Amendment applies to those in receipt of incomes of £2,000 a year and upwards, and I doubt whether the total number of people in his constituency who would be affected by this would be more than 2 or 3 per cent.

Viscount Hinchingbrooke: Two per cent.

Mr. Moyle: I give the noble Lord the benefit of 2 per cent.
I listened with great interest to the speech made by the hon. Member for Wycombe (Mr. John Hall). I did not agree, of course, with a word that he said but, if I may say so, it was a very able speech. Where I quarrel with hon. Members opposite is that they always prejudice their own advocacy on these issues, because as soon as they get up to ask the Chancellor for a particular concession they always attack the miner. It is a kind of disease of the sub-conscious mind which affects some Members of the party opposite, and comes into their consciousness during such debates as these.
I thought that my hon. Friend the Member for Loughborough (Mr. Cronin) was making a first-class speech, and then what happened? Up jumped the hon. Member for Wycombe and said "What about the concessionary coal that the miners receive?" That just shows the class consciousness of hon. Members opposite. They may not be

aware of it, but it is there. In any event, that intervention had nothing to do with the case, because concessionary coal for the miner is part of the conditions of his employment. Relief from taxation is not a condition of the employment of people whom we are discussing. If the hon. Gentleman wants concessions for the people whom he represents, those people should do the same as the workers and join an appropriate trade union and cease to join "top hat" organisations.
6.0 p.m.
With regard to the point that was made about the morals of this class of person, what is there in that regard that distinguishes these quarter of a million taxpayers from any other section of the community? What different standard of ethics can they say they possess which is not enjoyed by every section of the community? The hon. Member for Wycombe spoke about a sense of vocation. I have mixed with the middle class, and I find that they have a sense of vocation. I have mixed with the working classes, and, indeed, I find that they have a very strong sense of vocation. I have mixed very occasionally with the members of the aristocracy, and I must say at once that the secret of the charm of the aristocracy whom I have met is that they have no sense of vocation at all.
Therefore, when it is claimed as a reason for granting this tax concession as sought by the noble Lord that these people have a special standard of morality, and that they are more patriotic, I must say that there is no substance in the case at all. These people who are conscientious, those who have a sense of vocation, who are prepared to put their country first and are prepared to live and die for it, have no special claim at all. It is a common condition of every Britisher in this land. It is wrong to try to hive off these people as if they were some special type of citizen of unique ethical standards suffering excessively from some grievous taxation which is not shared equally by everybody according to their particular income.
Therefore, I hope that the Chancellor will in no way look favourably at this Amendment. I hope that he will look once again at the national balance sheet, where he will discover, as I have discovered, that since 1951, when the Tories came into power, the distribution of the


national income has gone gradually more and more in favour of those people who receive incomes of £2,000 a year and more, and less to the advantage of the working classes. I say to the noble Lord that since 1951 the Chancellor has been working in his direction. I sincerely hope that when we get into power we shall reverse this trend of distribution and reestablish the former trend, so that the workers get more and the people for whom he has spoken this afternoon do not get tax concessions at the expense of other sections of the community.
Amendment negatived.
Motion made, and question proposed, That the Clause stand part of the Bill.

Mr. Roy Jenkins: I am sorry to trouble the Committee a second time this after-noon, but this is our only opportunity, in dealing with this Bill, to consider the level of taxation and the balance between direct and indirect taxation as a whole. The matter, therefore, is clearly one which should be considered before the Committee passes from it.
I am bound to say that it is a pity that the Chancellor is not here for this debate on Clause 7. I should not be inclined to take the view that the Chancellor should sit on the Treasury Bench throughout the whole of our debate on the Finance Bill, but the provisions of this Clause raise £2,000 million worth of revenue, and I feel that it is verging on the discourteous to the Committee if the whole of this Clause is to be discussed without the Chancellor's presence, and without a few words from him.
In many respects, the present Chancellor will find it easy to improve on the record of his predecessor, but in this one respect it looks as though he may do rather worse, because the right hon. Gentleman who is now Lord Privy Seal was fairly assiduous in his attendance during Finance Bill debates, and I do not think we have ever had an occasion when the present Lord Privy Seal allowed the main revenue Clause to go through without being present or saying a word or two.

Sir E. Boyle: My right hon. Friend the Chancellor of the Exchequer had to attend, at 5 o'clock, a meeting which is still going on. He asked me to make his apologies if this point should be raised.

Mr. Jenkins: Ministers always have meetings during the Finance Bill. However, I naturally take note of what the Economic Secretary has said.
This Clause raises nearly half the total revenue in the Budget. To some extent, it is surprising that although we have just had this debate on Surtax, hon. Members opposite have made no attempt to secure a reduction in the standard rate. It has been a continuing cry from the opposite benches that constant reductions in the standard rate are a necessary part of the improvement in the health of the economy. Certainly the noble Lord who used to represent the constituency of Blackburn proclaimed, as a goal to be reached before the end of the last Parliament, that there should be a standard rate of 7s. 6d. I am surprised, in view of what he and many hon. Members opposite have said in the past, that they should have left the Order Paper so blank in that respect this year.
Last year hon. Members opposite were unanimous in claiming a reduction in the standard rate of Income Tax. Although there are many statistics which are not in a particularly healthy state at the present time, they are certainly no worse than they were a year ago. The main gold figures may not be so encouraging, but they are better than they were in May last year. The trade balance for April and May may not be very encouraging, but it is rather better than the trade balance for the equivalent period last year.

Mr. H. Wilson: If my hon. Friend will forgive me for intervening, may I recall to him that we have not yet had the trade balance figures for May, and we shall not get them until next week, so that it is perhaps premature to say whether they are better or worse. When he refers to May being better than last year in regard to reserves, may I remind him that it was a purely negative result, in that reserves went neither up nor down, compared with May of the previous year, when our gold and dollar reserves rose by 164 million dollars?

Mr. Jenkins: I entirely accept what my right hon. Friend has said. He is quite right in saying that we have not yet had the trade figures for May. There is nothing in the figures to make last year a particularly appropriate year


compared with this year, in that respect. After all, only last October, the Lord Privy Seal, speaking on behalf of the whole Cabinet presumably, was vigorously defending what he did last year by saying that he thought the economy needed a fillip such as he was able to give it.
Surely if the view is taken, on the other side of the Committee, that this is the only major sort of fillip to which the economy responds, a fillip is still more necessary this year than it was last year. So far as production is concerned, we have now reached the stage where the index has been almost completely flat for a year. Even though the plateau, which the Chancellor has reached as regards prices, may be a rather peculiar sort of plateau, he does at least appear to have brought us on to a plateau, in the more usual sense of the word, in the matter of production, and we have been on it now for a year.
I see that the hon. Member for Louth (Mr. Osborne) is eager to intervene, as he so often is. I would suggest to him, and to his hon. Friends, that the absence of any Amendments from their side of the Committee indicates that he and many of his hon. Friends have lost a good deal of their confidence in their traditional remedy for the evils of our economy and the difficulties in which we find ourselves.

Sir Alexander Spearman: There is one big difference between now and this time last year—perhaps the result of the confidence given by the result of the General Election—that there has been an enormous increase in investment projects, which, however admirable in the long run, have immensely increased inflationary pressure, and therefore made it much less desirable to reduce taxation.

Mr. Jenkins: There are many other differences between this year and last year, including the destruction of the previous Chancellor's reputation by his being over-generous in this matter of direct taxation. The present Chancellor, who is absent this afternoon, has learnt caution, even if he does not attend our debates a great deal.
What is our view about direct taxation in general? Despite what hon. Gentle-

men opposite may say, we do not like taxation, certainly not heavy rates of taxation, for their own sake, and we do not desire to see them maintained as a sort of hair shirt to be worn by the community. We are, none the less, very sceptical about proposals for special reductions in taxation which take no real account of the burdens which the country has to carry, and which include no acceptable proposals as to how economies can be brought about, or suggestions of alternative means for raising the necessary revenue.
6.15 p.m.
Broadly speaking, given the fact that certain sums of revenue must be raised, we prefer direct taxation, with its progressive basis, to many other forms of revenue raising. This year, we would very strongly take the view that the balance has been tilted, if anything, rather too much towards indirect taxation and away from direct taxation. That was certainly the effect of the Budgets of 1955; we had an important direct taxation concession in the first Budget, and important, and unwelcome, additions to indirect taxation in the second Budget. This year, of course, we have had the further addition in indirect taxation of the Tobacco Duty. Surely, having regard to the recent history of price levels in this country, we ought to be very hesitant indeed about doing anything further to increase the level of indirect taxation, and we ought, if anything, to tip the balance in the other direction.
I notice that the Lord Privy Seal, speaking on this question in October, 1955, said:
Of course the Budget has been attacked for being unpopular and unfair. Nothing could be more unpopular or more unfair to the working people than allowing inflation to continue unchecked."—[OFFICIAL REPORT, 31st October, 1955; Vol. 545, c. 703.]
That was a very remarkable thing to say, particularly as it was echoed, with a slight change, by the Economic Secretary earlier this afternoon. He said that nothing could do more harm to the middle classes than to allow inflation to continue unchecked. We hear these pious expressions of view at every Budget, and all that happens in between is that the price level rises still more quickly than ever.
I would draw the conclusion that the balance is tipped rather too far at the


present time towards indirect taxation, and we should take the view that there ought to be no further movement in that direction at the present time. I am sorry that we are not able to have the Chancellor with us this afternoon; I hope that the Economic Secretary or the Financial Secretary, whoever is to reply on this particular point, will give us the Government's view about this balance. It is always one of the most important and difficult tasks of Treasury Ministers to strike the correct balance between direct and indirect taxation, and in my opinion it is important that we should know what their view is.
When discussing the level of direct taxation, there is a further important point which must be borne in mind, that is to say, the base on which the taxation is imposed. In the course of his reply on the Amendment, the Economic Secretary was kind enough to say that he had some sympathy for my view that there could be redistribution within, broadly speaking, the same income groups. I am glad to know he goes so far with me.
One of the very worrying features of our tax structure, as he knows, and as I have said before in this Committee, is that the base of taxation, because of tax avoidance in its widest sense, has been whittled away, so that our taxation rates are really not so heavy as they would appear to be. The effective level of taxation, not upon the mass of the people as a whole but upon those in, broadly speaking, the upper income brackets, is not as high as it would appear from the simple statement which the right hon. Gentleman has made. It does fall very unfairly upon certain people.
I should like the Economic Secretary to apply his mind to this problem, without any commitment, and give us an indication whether he does not agree that there are some problems related to the tax base, and the associated matter of tax avoidance, in its widest sense, on which the mind of the Government is in no way closed.

Mr. Cyril Osborne: I would ask the Committee to look at Clause 7 and the heavy taxation which it imposes from the point of view of production. I realise that if any claim is to be made for a reduction in direct taxation, it can only be justified in so far as it produces

a larger national cake. If it would produce a smaller national cake, there is no justification for it at all; just as, if we had egalitarianism run mad, and it produced a much smaller national cake, that again in itself could not be justified.
I hold that Clause 7 imposes such a penal rate of taxation that it is causing our economic system to work less efficiently than it would otherwise do. May I say this to the Committee, and state my own faith? The present capitalist system is motivated by the profit motive. High taxation—Income Tax and Surtax—is, in my opinion, dangerously weakening that mainspring of our economy. So far, no alternative mainspring, no other motive power to make our economic system work, has been found, either on this side of the Committee or by hon. and right hon. Gentlemen opposite. They have found nothing, as an alternative to the profit motive, which will cause men to work, or which could take its place.
I put it to hon. Gentlemen opposite that until something is put in place of the profit motive as the basis or mainspring of our economy, that that mainspring should be allowed to function to its fullest efficiency, for, by so doing, it will produce rewards not only for those who are in charge of our economic system, but also for those who benefit through wages, salaries, or the social benefits which they derive from it.
I should like to make this one other preliminary remark. I believe that the 8s. 6d. Income Tax rate, to which the hon. Member for Stechford (Mr. Roy Jenkins) referred, is far too high. I should like to see it down to 5s. and I will say why. I believe that the troubles which we see arising in the motor trade foreshadow considerable unemployment throughout the country, and that it is likely to spread to other trades. What we require to save us from competition that will be more severe than anything we have seen since the 'twenties and, possibly, a crisis as great as anything we have seen since 1931, is the ablest and finest brains at the top. There is no other way of doing it.
If we are to get that, we must do exactly what the Socialist Party did when in office in 1947: we have to pay the rate for the job. When they were appointing the new chairmen of the


nationalised boards, the Socialist Government argued that if we were to have the finest brains, we had to pay for them.
The rate of 8s. 6d. is far too high. It is a relic of war-time taxation. Between 1922 and 1938, Income Tax moved only from 4s. to 5s. 6d. in the £. I should like to see it come down progressively to 5s. The Surtax rate of 10s., starting at the £2,000 level, is savagely high. Instead of calling it Surtax, I should like to see it called the penal tax, for this reason, with which I think hon. Members will agree. It makes private saving almost impossible, and it makes impossible the three things which the middle class want above all else. Middle-class people are unable to educate their children as they would like, they are unable to save for their widows and are unable to save for their old age and retirement. Hon. Members opposite know these facts to be true.
Therefore, I should like to see the Surtax rate reduced to 5s. so that ultimately—[HON. MEMBERS: "Surtax?"] I am stating my own case. I should like to see Income Tax and Surtax jointly reduced gradually until they are not more than 10s. in the £, for beyond that rate the law of diminishing returns must operate and ultimately will produce economic stagnation.
On the question of the £2,000 starting level, I remind hon. Members that in the last twenty years the value of money has been reduced to about one-third. If there-fore. we were to start Surtax at the same level of purchasing power as twenty years ago, it would start at £6,000 a year. To put it another way, if the purchasing power of money has dropped to one-third in terms of purchasing power in 1936, Surtax, starting at a correspondingly reduced level, would have begun at £700 a year. Twenty years ago, that would have been regarded as next door to communistic confiscation. Whilst I realise that my right hon. Friend cannot do what I want him to do at once, I hope that he will keep it in view as a goal to be aimed at.

Mr. Chapman: We all have sympathy with this idea of getting Income Tax down to 5s. in the £—

Mr. John Rankin: Four shillings and elevenpence.

Mr. Chapman: —but since some £600 million to £1,000 million of revenue is involved by such a reduction, what does the hon. Member propose should be done? Would he scale down Government expenditure by that extent?

Mr. Rankin: Do what Moses did.

Mr. Osborne: Obviously, it cannot be done all at once, or now.
My whole point is that if the relatively small proportion of top men who run industry were adequately paid for so doing, and if as a result they produced greater economic efficiency and a greater national cake, we should justify, even from the point of view of old-age pensioners, paying them very much more than they are getting now. I would pay them out of their results, which is the finest way to run an economic system.
I contend that under the provisions contained in the Clause, our taxation is far too high and is reducing our economic efficiency. How are the executives of our two greatest competitors treated in comparison? Experience in the last few years has shown that we are losing too many of our top executives to America, Canada and such places because they get higher wages and pay much less taxation than in this country.

Mr. Austin Albu: Names?

Mr. Osborne: I will give the figures presently, if the hon. Member waits.
There are two directions in which we must compete, and in which our economic efficiency will decide whether we survive. Our two greatest competitors, of course, are the United States and the people who now live behind the Iron Curtain, under the guidance of Russia. The great need of the age in achieving greater efficiency is the scientists and technicians who will help us with our atomic problem. We are already producing proportionately fewer of these men than are our two great rivals, but the tragedy of our position is that, of the smaller number of scientists and technicians we are producing, we are losing many of them to the United States and to Canada.
The hon. Member for Edmonton (Mr. Albu) asked me for names. The Times, on 20th April this year, contained an article from a special correspondent in California, who said that in the last four


years the Lockheed Corporation had recruited a large number of foreign scientists, 30 per cent, of whom came from the United Kingdom. It is my contention that the main reason for their going from this country is the provisions of Clause 7.
If the Committee will allow me, I will give a piece of first-rate evidence. A month ago I went round the biggest scientific factory with the best-known name in the world, some thirty miles from London. I will not identify it more closely than that. I asked the managing director whether it was true that he was losing his scientists because they were being over-taxed. His reply was interesting. In the first place, he said, the scientists as such were not money grabbers. They were not worried so much about mere money but were interested in their jobs. Although they got lower salaries and paid higher taxes here than was the case overseas, many of them were content to remain and work in this country. But he added this: "The trouble is with their wives. It is their wives who have to do the shopping and who spend the net income, and it is their wives who speak to their husbands and cause us to lose many of our most promising and best young men".

Mr. F. A. Burden: Did the husbands go to America to get out of the way of their wives?

Mr. Osborne: I was trying to advance a serious argument.
I know that the hon. Member for Edmonton is keenly interested in this topic, and I refer him to an article in The Times of 11th May, dealing with comparable taxation in the United States and in this country—the taxation that is imposed under the provisions of the Clause. According to the report, one of the American business executives said:
The Britisher can go to the United States, suffer the tax burden and smile; here, we should suffer it and groan.
6.30 p.m.
This is terribly important to us as a nation. I believe that we are losing some of our finest men because we are taxing them too much. In The Times last Saturday the Zenith Radio Corporation of Chicago was advertising for highly qualified electronic engineers, and offering to pay their expenses to go to

America, and the expenses of their wives and families, and to pay them much higher salaries, on which the tax would be much less.
Last year the Westinghouse Company had a man in London seeking the same type of highly qualified engineers and offering them from between £3,500 to £4,500 a year, plus houses, plus travel expenses, plus everything, and with taxation at about 40 per cent. below that which we impose on them by this Clause. My friends in the chemical world tell me that Du Ponts have a man in this country at this time seeking the best of our young men to induce them to go to America.
It may be asked what the difference is between taxation under this Clause and taxation which the Americans have to pay. I have three good sets of figures here which, I think, hon. Members should bear in mind. The single man with earned income only, and earning £2,000 a year in this country, pays £541 in tax, or 27·05 per cent. of his earnings. A similar type of man earning 5,000 dollars in the States pays 944 dollars in tax, or 18·88 per cent. The £3,000 a year man here pays £1,076 in tax under this Clause, which represents 35·86 per cent. His counterpart earning 8,000 dollars in America pays 1,780 dollars in tax, or 22·84 per cent. The £9,000 a year man in this country pays £5,326, or 59·17 per cent., in tax, while the 25,000 dollar a year man, the most comparable to our £9,000 a year man, pays 9,796 dollars, or 3918 per cent., in tax.
Right hon. and hon. Members opposite may ask, why bother about the £9,000 a year man? He is the type of man, if he is earning his income in this competitive world, that this country wants more than anybody else, and without whom our economic outlook is bleak indeed. I remind hon. and right hon. Members opposite again that when they national. iced the industries they did, they said at the time that the chairmen of the boards should receive £8,000 or £9,000 a year. "Pay the rate for the job," they said Those sums which they themselves thought necessary then would represent about £12,000 now.
The problem before the Government is whether to have more taxation or more production. It seems to me that they have sufficient taxation. They have


a surplus in view of between £400 million and £500 million. What we want above all things is more production. We may tax ourselves as much as we will, but that will not save us. What we must have is much greater production.
I offer a further piece of evidence in support of my thesis. Hon. Members opposite for many years, certainly for all the years that I have been a Member of Parliament, have been holding up to us the economic system in Russia as one we should in some degree follow.

Mr. Chapman: Nonsense.

Mr. Osborne: In Russia today are the people who are going to be our competitors, and they will sell not merely at the market price in the world's markets, but, if necessary, at the political price. There, wage earners and salary earners pay only 13 per cent. of their earnings, no matter how much they earn; it is about 2s. 7½d. in the £. Therefore, a man in Russia who really can produce can keep what he earns, whereas in this country there is no inducement to a man to do his utmost. Even artists and writers in Russia, the least privileged people—

Mr. H. Wilson: The most privileged.

Mr. Osborne: Even they pay only 55 per cent. as against the 85 per cent. tax which we imposed by this Clause.

Mr. Wilson: Surely the hon. Member is not suggesting that we in this country should have the same degree of class distinction that they have in the Soviet Union?

Mr. Osborne: It is so nice that hon. and right hon. Members opposite have at last begun to learn how foolish they were when they used to say, "The Left can talk to Left. Let us be like the Russians."

Mr. Wilson: We have not.

Mr. Osborne: The reason why the Russians are our great competitors in economic affairs is that they are not imposing the same penal direct taxation we have in this country. They impose a greater degree of indirect taxation. I quote from the U.S.A. "National Tax Journal," Vol. 6. 1953, which, of Soviet taxation, says:
Commodity taxation normally accounts for from 50 per cent. to 70 per cent. of the total revenue "—

that is a matter to ponder—
whereas the revenue from direct taxation represents only 8 per cent.
That is, as against from 50 per cent. to 70 per cent.

Mr. Chapman: Of what?

Mr. Osborne: Of the total budget. The Russians have adopted indirect taxation rather than direct, and about this choice, the writer says:
The fact that the Soviets rely on commodity taxation in spite of their ideological bias against It attests its superiority for their purposes in comparison with the more direct forms of taxation. The most important consideration may be the belief that because of the so-called money illusion personal income tax has a more harmful effect on labouring incentive than taxes which raise the prices of commodities.
I hope that the Committee will agree that I am trying to look at this problem entirely from the production point of view. The Americans are not taxing their people nearly so much as we tax ours, and the Russians do not tax theirs as much, either, and so I put to my right hon. Friend the point that we should tax earnings a great deal less and tax spending a great deal more, because a lower tax on earnings would increase production, while increasing taxes on spending would discourage spending and might encourage saving. That is what we require.
I have been told to be brief. I do not want to speak for too long, although this is exempted business. I would remind hon. and right hon. Members that it was over a Finance Bill and the principles involved in this Clause that we had a civil war in the seventeenth century. This is one of the rare occasions when the back benchers have the right to state what they believe to be ills to be remedied. I was going to deal with the proposal of the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) for greater egalitarianism under this Clause and our taxation, and I have some figures which will interest him very much, but as I want to conclude I will save those figures for him until his pamphlet is issued, when we can produce the evidence against his proposals.
I believe that the Chancellor should take the risk of cutting direct taxation, because I think that it would increase production. If we do not cut direct taxation, the economic blizzard which I think


will come in the next twelve months, unless we are lucky, will not only hit the Surtax payers but will cause suffering to everybody in the country, including those who are the recipients of the benefits of the Welfare State. I know that my right hon. Friend cannot do anything this year, but I beg him to bear in mind that what we want is a great deal less taxation in order to secure more production.

Mr. Austen Albu: I hope that the hon. Member for Louth (Mr. Osborne) will accept that we on this side of the Committee prefer a social policy in accordance with our own traditions rather than with those of the Soviet Union. I realise that he has pleaded for this country to follow the Soviet Union. He said that we should have a division of our national income and the sort of incentives that operate in the Soviet Union, but we happen to have built up different habits and a tradition of class differences and income differences, a tradition in which I hope and believe we shall continue to move towards greater equality.
Perhaps one of the most engaging features of the hon. Member is his extraordinary lack of confidence in his own Government, particularly in the conduct of economic affairs. He has some quite good ideas, but it is extraordinary how, when he gets an idea between his teeth, he lets it worry him.

Mr. Osborne: That is better than having no ideas at all.

Mr. Albu: Goodness knows, I have not much confidence in the way in which the present Government conduct our economic affairs and in what will happen to our economy in a year or eighteen months unless some substantial changes are made, but I think that the hon. Member for Louth and some of his hon. Friends cannot be living in this world at all. They are talking as though no one was doing anything, as though nothing was happening in industry, no advances were being made, no more people were being employed, nothing was being done in scientific research and development, and as though there had been no increase in investments or in exports since the war.
One would think that the country was down quite flat, with hardly a breath in it at all. The hon. Member is doing

almost as much harm as did some of his hon. Friends abroad when we, on this side of the Committee, were in office. He is selling Britain down the river. He is implying that nobody is working, that nobody is doing anything, that there is no initiative and nothing can be done at all.

The Deputy-Chairman(Sir Rhys Hopkin Morris): I think the hon. Member is going a little wide of the Motion, unless he connects his remarks with the Clause.

Mr. Albu: I will, Sir Rhys, bring my remarks to the point, which was the point of the speech of the hon. Member for Louth. He was dealing with incentives and with the level of direct taxation as the main disincentive in preventing the country from making advances. Goodness knows that a great deal needs to be done and that the appalling lack of any real economic policy on the part of the Government is likely to lead us into trouble, but it cannot be said that there is not a great deal of initiative shown by industry, both by managers who are subject to Surtax, by technicians who are largely not, and by workers as a whole. It is no good grossly exaggerating the situation. The problem of the relation of direct taxation to incentives is very difficult.
The hon. Member for Louth quoted figures of American taxation, but they did not tell the whole story. I have no other figures in my possession at the moment, but I doubt whether the hon. Member's figures included State taxation and local taxation, which is sometimes very high in the United States, as well as the Federal taxation. I think that he quoted only the Federal taxation, because I understand that the levels of direct taxation on the sort of incomes which he mentioned are not very different in the United States from what they are in this country.
It is the fact that the level of incomes, wages and salaries is very much higher in the United States, but that country is very much richer than ours. I do not know how we shall deal with this problem unless we do as the Russians do, and as, apparently, the hon. Member for Louth wishes us to do, which is to prevent our people leaving our shores at all.

Mr. Osborne: indicated dissent.

6.45 p.m.

Mr. Albu: I do not know how otherwise we can prevent people leaving our shores for higher incomes elsewhere. Actually, only a small proportion of our people do so, and I think that when they reach the United States many of them soon come back. At any rate, that is my experience. Whilst we see the advertisements which the hon. Member mentioned and we hear stories about people leaving, the numbers are not substantial and not of a nature which should make us change the whole basis of our taxation system. The hon. Member for Louth asked for such a substantial reduction in taxation that it would mean a complete redistribution of our national income.

Mr. Osborne: No.

Mr. Albu: If we were to reduce Income Tax to 5s. and reduce Surtax as well, the resultant effect on the distribution of the national income would be substantial indeed, because it would mean that we should have to make substantial reductions in the social services which, as my hon. Friend the Member for Uxbridge (Mr. Beswick) pointed out when the hon. Member for Louth was speaking, are considerable additions to the middle ranges of incomes to which the hon. Member was referring. There is no doubt that a young technician in the United States would be ruined if he or his family became seriously ill. That does not apply in this country.

Mr. Gerald Nabarro: A sweeping statement of that kind is surely quite wrong. The average man in the United States avails himself of every kind of insurance against that kind of thing happening, and that is a direct counterpart of the social services in this country.

Mr. Albu: I cannot pursue that point very far without getting out of order, but it costs a lot of money to the young man in the United States to do that, and even then he has not covered everything when he has finished. The doctors put up their fees to make sure that he pays out more than he gets back from insurance benefits.
It is no good hon. Members opposite continuing to demand really sweeping reductions in direct taxation, because it would mean such an enormous change in the distribution of the national income

that we should have a terrific upheaval. I should like to support my hon. Friend the Member for Stechford (Mr. Roy Jenkins) on the possibilities of changes within the present level of direct taxation, which I was glad to hear the Economic Secretary appear to support when we were discussing the Amendment dealing with Surtax.
There is no doubt that we must watch very carefully the proportions of direct and indirect taxation. As my hon. Friend the Member for Stechford said, there has been a substantial move on the part of the Government to relieve direct taxation and increase the proportion of indirect taxation, but it is also important that we should look further at the relation between earned and unearned income. There is no doubt that at present—and this applies especially to the sort of levels which the Committee has been considering today—there is a substantial injustice here.
I think that there would be support even on this side of the Committee for a reduction of taxation of the kind referred to, where there are large families, particularly in cases of earned income, but in view of the distribution of capital in this country which continues at about the same level as it has been for many years past, we certainly could not support further reductions in taxation on unearned income.
It is said frequently that wage and salary earners have gained enormously since before the war at the expense of the professional and self-employed people, and particularly at the expense of those who are in receipt of rent, interest and dividends. This is not true. Between 1938 and 1954 wages and salaries went up, after taxation, from 60 per cent. to 70 per cent. of the national product, but the number of employees actually went up during that period by 36 per cent. So, per head of employed persons, it is not true that the proportion of national income going to wage and salary earners has gone up. Therefore, any move to reverse the present distribution of income, especially by reductions in direct taxation which cover both earned and unearned incomes, could only have the effect of worsening the situation of the wage and salary earners in regard to the proportion of the national income and the increments of the national income as it arises which they receive.
Hon. Gentlemen opposite, irrespective of their hidden thoughts and feelings, must always in this place express themselves as in favour of reductions of taxation for incentive purposes. One or two—for instance, the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke)—are more frank about their interest in the reduction of taxation. I do not mean that they have a personal interest, but the interest they have on behalf of those for whom they speak. On the whole, however, hon. Gentlemen opposite will generally put forward this argument on the ground that the increase of incentives to effort has an effect upon production.
Now on this matter we know very little, and there is small evidence that the present levels of taxation have serious effects on the managerial and technical classes. As I said earlier, to some extent we have become accustomed to the present level of income and the social distinctions to which it leads. One thing is certain, however, and that is that the obvious gross expenditure which cannot possibly be paid for out of taxed income causes a great deal of dissatisfaction throughout all classes of the working community, and there is no doubt that the Government will have to pay attention to it.
If I may say so to the hon. Gentleman the Member for Langstone (Mr. Stevens), it is no good chartered accountants trying to say that there is no tax avoidance—

Mr. Stevens: Would the hon. Gentleman be good enough to say when any responsible chartered accountant said any such thing?

Mr. Albu: I am glad that the hon. Gentleman agrees with me that there is a lot of tax avoidance, because I have heard chartered accountants strongly support the view that there is no real tax avoidance.

Mr. Stevens: In that case will the hon. Gentleman be good enough to say how he orders his tax affairs? Does he so order them as to avoid paying as much tax as he legally can?

Mr. Albu: Unfortunately, as a Member of Parliament, and practically nothing else, I do riot have much opportunity of doing what I know the hon. Gentleman will agree is done in a large number of business circles. I have not that opportunity, if only because I have not got

the income to do it. It is clear, as everybody knows, that there is a great deal of tax avoidance through the use of expense accounts, and also in all the other ways referred to in the Minority Report of the Royal Commission on the Taxation of Profits and Income. Until these matters are cleared up, I do not think that we can expect the community, and the mass of the people who earn their living, to accept any great reduction in the levels of taxation of those who receive the higher incomes.
These matters must all be considered together. What we are really considering is the standard of living which people can obtain from their incomes. Until this has been made to appear much more just and much more equal than it is at present, I do not think we can expect ordinary workers, at any rate, to accept great reductions in the levels of taxation imposed on the managerial classes.
This is an important matter. It is an argument between the two sides of the Committee. Hon. Gentlemen opposite say that if we greatly stretch the class, the social, the economic, the expenditure differences, we shall get a rise in effort, a rise in production, a rise in activity. We say exactly the opposite. We say that what is holding back a real jump forward in productivity in this country are the great class differences that still exist, in education, in expenditure, in behaviour, in all sorts of things. The funny thing is—I give the point to the hon. Member for Louth—that although perhaps in the United States and in Russia, where there are not these social differences—leaving out the economic differences—there may be a greater feeling of effort and energy, it is to the social differences, which have to be reduced, that attention must be paid if we want to release the latent energies of our people. Therefore, anything done to increase the social differences in this country will only have the effect, under our conditions and under our traditions, of preventing the rise in production which the hon. Gentleman so particularly wants.

Sir Henry d'Avigdor-Goldsmid: Having tried in vain to catch your eye on the Second Reading of this Bill. Sir Rhys, and having sat here since half-past three o'clock, I am now proud to nail my colours to the same mast as that of my hon. Friend the Member for Louth (Mr. Osborne), and perhaps we shall pitch


our tent in Hyde Park and get an audience there. [HON. MEMBERS: "Moscow."]
Having said that, I am rather surprised that we on this side of the Committee, who have been suggesting reductions in direct taxation, should have met with such a cool response from hon. Gentlemen opposite. Just as in Napoleon's armies the private soldier carried a field marshal's baton in his knapsack, it is reasonable to say that any young man or woman who goes to a technical school carries with him or her, in the appropriate part of his accoutrement, a Surtax demand note. I say that because at present there is no doubt that anybody who does well in a technical school will be a Surtax payer, if he takes advantage of his opportunities.
I shall continue on this point because there has been a good deal of discussion of it. My hon. Friend the Member for Wycombe (Mr. John Hall) gave a great deal of detailed information to the Committee about American firms who are recruiting here, and the hon. Member for Louth emphasised that point. It was pooh-poohed, but I want to point out the real facts.
There is one enormous company in the world, Unilever Ltd., perhaps more familiar to hon. Gentlemen opposite as Lever Brothers. At a company meeting, permission was asked of its shareholders to abolish the director's stock holding qualification, which is £1,000 of stock. This may be preference stock, which would cost only about £1,000 in the market. It was asked that this qualification should be abolished because it was a direct embarrassment to the company in the choice of people to go on to the directorial board.
Now Unilever Ltd. is one of the great progressive companies of this country, indeed of the world. It is recruiting people widely from schools of management which are specially developed. In those circumstances it might be thought that the company was getting the cream of the managerial classes. Yet the investment of £1,000 is an embarrassment to such people, in spite of the attraction of the great rewards about which we have heard, and therefore the company wishes to abolish the qualification. I ask hon.

Gentlemen opposite to think over that point.
The right hon. Member for Battersea, North (Mr. Jay) mentioned the fact that because luxury hotels were full of people, therefore the economy of this country was in a satisfactory state, and there was no suffering as a result of taxation. I would point out two things. First, what goes on in luxury hotels is no evidence of what goes on in the rest of the country. Secondly, one or two activities are ceasing as a result of the level of taxation, and, indeed, one has entirely ceased. Here I shall probably have the support of the hon. Member for Stechford (Mr. Roy Jenkins). I refer to the publishing of poetry.
The monthly literary magazine practically does not exist in this country today. I can think of only one—in which I recently saw contributions not only from the hon. Member for Stechford but also from a colleague of his on the Opposition Front Bench which is financed by American money and is called Encounter. The reason for this lack of monthly literary magazines in this country is that there are no men with money to throw away on them. Such magazines do not make a profit, but they make a very valuable contribution to our life. None of us wants a life which is devoid of poetry, but I should like to know where poets will find a means of getting into print.
7.0 p.m.
Now I turn to a subject which may appeal to other hon. Members. Yesterday the Derby, the most important horse race in our calendar, took place at Epsom Downs, and the first three horses were owned and trained outside England. Why is that? It is because horse racing in England is suffering from the same cause. It may be said that the fact that the breeding of good horses in this country is dying does not create hardship. Certainly it does not inflict great hardship, but it reduces a great industry to a very low level.
This country has had a reputation for breeding the best horses. We have lost that reputation, and shall have lost it for ever if taxation continues at its present rate. The reason is simple. If a good horse is produced here, it is quickly sold abroad, and the result is that we do not get the benefit of its services at stud. That


does not represent a loss to everybody, but I cite it as an example of something which is collapsing under taxation. Some hon. Members may rejoice at it, but some will not.
Earlier today a good deal of indignation was expressed about the possible sale of the nation's interests in the Trinidad Oil Company. Hon. Members on both sides of the House, and particularly hon. Members opposite, expressed great concern lest this great Commonwealth asset should disappear from our control. There are means, perhaps through the Capital Issues Committee or other Treasury control—the Chancellor did not explain exactly what—by which we can prevent the control of the company passing out of this country.
However, we cannot control the steady flow of young technicians leaving this country. The reason why we cannot is that they seek a higher reward for their abilities in the United States. We are embarking upon an immense technical training programme, and are spending £97 million—I am certain that it will soon be over £100 million—to produce the people who will make our industry work. What are we doing to keep them here? [An HON. MEMBER: "Taxing them to death."] Poetry is the weakest of the arts, and it dies first. Horse racing is not important, and it is dying also.
So long as we live under a system organised as it is at present, we shall find that taxation will drive out the people who bring poetry or sport into our lives. We shall eventually drive out the type of people who made this country great. It will end by the industry of the workers becoming useless because it will not have the technical help that it needs, help which we ought to be doing our best to keep in this country.

Mr. Chapman: We appreciate the great sincerity of the hon. Member for Wallsall, South (Sir H. d'Avigdor-Goldsmid) in what he has said, especially when he talked about the lack of poetry magazines, but I think he fails to realise that our society is very unlikely to return to the days when things of that sort could depend upon rich private patrons. We ought rather to be turning our minds to the adaptation of our society to keep such things going without rich patrons. In wishing those days back again, the hon.

Member is chasing a mirage, just as the hon. Member for Louth (Mr. Osborne) has been chasing the mirage of the 5s. Income Tax level, something which cannot be brought back. at any rate within the foreseeable future.
What we have to do is to think about the incentives that we can give to the arts and the other things in a new society which has a greater level of equality and in which we are unlikely to return to the inequality for which hon. Members opposite are all the time hankering. We must keep those things going despite the new demands of our more equal society.
I should not have risen had I not been afraid that some of the opening remarks by my hon. Friend the Member for Stechford (Mr. Roy Jenkins) might be misinterpreted. He spoke about the balance between the levels of direct and indirect taxation in our society. I thought that his criticisms of the level of present indirect taxation might run the risk of being misinterpreted.
I should like to put forward a case with which my hon. Friend may not wholly agree, although I think he will. I believe that there is far too much loose talk about the undesirably high level of indirect taxation. Today the level of indirect taxation roughly equals that of direct taxation. I always think of our revenue falling into two halves, beer, tobacco and Purchase Tax bringing in £2,000 million and the Inland Revenue bringing in the other £2,000 million.
Within the broad limits of our society, that is inevitable. Indeed, I think it is desirable. I believe it to be right that the standard rate of Income Tax should be 8s. 6d. or 9s., or whatever other figure we may choose, and that there should be heavy rates, perhaps even penal rates, of Purchase Tax and substantial rates on beer and tobacco. Having established a level of Income Tax in the range of 8s. 6d.-10s. in the £, we should raise the rest of the money needed by the Exchequer by taxing goods which people need not buy if they do not wish to do so. I believe we should have a strong luxury tax.

The Temporary Chairman (Mr. Frank Bowles): The Committee is concerned at the moment simply with Income Tax. The hon. Member is going slightly wide of the debate.

Mr. Chapman: I will quickly bring my remarks on that point to a close, Mr. Bowles. I do not agree with harsh impositions on household necessities and so on. I have in mind half of the taxation being raised by tax upon luxuries and other goods the purchase of which is a matter of choice, the other half of the revenue being raised, as it is now, by direct taxation. I was rather afraid from the way in which my hon. Friend the Member for Stechford spoke that he was to some extent supporting a considerable reduction in Purchase Tax on luxuries in favour of a rise in the Income Tax rates. I do not think that, on reflection, he would want to do that.
Turning to the question of the level of direct tax, I think that there is this to be said. I am disappointed that this Clause is really continuing the disincentive effects of direct taxation. I do not believe, as hon. Members opposite do, that there is a real disincentive on the higher income earners from direct taxation. I believe that, by and large, when one gets to managerial grades in society today, the incentive to work hard is not the income at the end of it but the service given, the power that there is, both for good and evil, and the command of leadership in society. All these things are incentives to the higher range of incomes in our society today, and Income Tax is not a great disincentive.
I would say that the trouble with the present rate of direct taxation is the failure to relieve people at the bottom ends of the bands of Income Tax. It happens in many industries today that the wife does not go out to work for more than 30 or 35 hours a week because, beyond that point, she immediately runs into Income Tax payments. I believe that it is much more important to give relief at that end of the scale than to talk about the disincentives, which is the fear which the hon. Member for Louth has, at the other end of the scale.

Mr. Osborne: At both ends.

Mr. Chapman: The hon. Member will admit that his speech was mainly devoted to the top end, and that the Royal Commission forcibly pointed out that his arguments have very little weight at all from the researches that it was able to make, and that often the disincentive effects of high taxation were not very strong on high incomes. I do not know

why the hon. Member goes on peddling this every year in view of the evidence which is all the time mounting up against him and his hon. Friends.
I repeat what I said to the hon. Member for Walsall, South, that it is much more important for the Committee and the House to be thinking today how to adapt the inevitable levels of taxation to the preservation of all the things which he has in mind, and we have in mind, and not chasing this mirage of lower direct taxation and the return of rich patrons. These things have gone for ever, and we on this side of the Committee are glad that this is so. We want the hon. Member to join with us in seeking to keep the worth-while things going, nevertheless.

7.15 p.m.

Mr. F. P. Crowder: I intervene for literally only a few minutes, and I would like to say particularly on behalf of my constituency, where there are large numbers of black-coated workers and members of the professional and middle classes, that they, like other sections of the community, are bearing heavy hardships at this moment. We have heard a lot from hon. Members on this side of the Committee and on the other side about incentives. I do not propose to concern myself with that this evening. What I have been interested to learn from the speeches of hon. Gentlemen opposite is that there does seem to be a very real understanding of this hardship and of the fact that this particular section of the community is not getting the fair deal that it should have. I believe that the labourer is worthy of his hire. As a member of the Bar, I say that if people are prepared to pay someone in my profession £3,000 or £4,000 a year for the work that he is doing—and it is quite hard work and entails long hours; there is no question of a 48 hour week—he should not be penalised to the extent he is at the moment.
Take the case of the ordinary artisan. Suppose that he was earning £4 or £5 before the war. Today his earnings have gone up, and very often he will be taking home between £12, £14 and £16 a week. It is very different with the professional man, because although his wages have gone up slightly, not very much, his taxation has been very much increased. That is where the unfairness comes about. The


labourer is probably living in a house which is rent restricted and paying 7s. 6d. a week.

Mrs. Harriet Slater: There are not many of them.

Mr. Crowder: Certainly there are cottages in this country let at only 5s. a week and even lower, and very often something like £40 a week in wages may be going into that household. If the hon. Lady disagrees, I will put it a little higher and make it 15s. At any rate, he does not have to pay very much because he is subsidised by the Rent Restriction Acts in respect of his house. He is not responsible, as I know the other man need not be, for having to educate his children privately, and, of course, his food is subsidised and he does not have to dress in perhaps quite the same way as the professional man.
The position of the professional man is very different. It is probably absolutely necessary for him to have a car of his own—certainly it is for most members of the Bar, to give an example. He is probably in the position of paying for his own house, as, indeed, the man at the other end of the scale may be. He has probably to educate his children at his own expense, and hon. Members know how school fees have gone up during the past few years. I know that he need not do that. Do not let it be thought that I do not accept that for one moment, but it is worth bearing in mind that if everyone today educating his children at his own expense ceased to do so, and sent them to the local council schools, we should be in a very different position.

Mr. Albu: Does the hon. Member not realise that the number of pupils per teacher in these schools for which people pay is very much less than in the other schools, and that if these teachers were released the council schools would be much better off?

Mr. Crowder: I do not agree on that point. I do not think the council school would be better off. The National Health Service is much relieved by a large number of people who pay for their own drugs and doctors. The professional man who is acting in these circumstances is giving the country a certain relief.
The other case which I have in mind and which I would point out as a particularly

harsh one is that of the widow who is living on the income of a trust, because not only has taxation and Surtax gone up on that income, but she is hit by the fact that the cost of living has gone up to such an extent since 1939. It is inequitable that people at the other end of the scale should have had the rises which they have had in the past while the middle classes are gradually, because of this high taxation, being squeezed out.
I believe that the middle and professional classes represent a very important section of the community, and I am sure that hon. Members opposite want to see them maintained, just as much as I do. All that I say now is that they should get a fair deal vis-à-vis other sections of the community. They are not getting a fair deal, and it is time that the Government took some action on this matter. I know that possibly now is not the time to do it because of the present economic situation, but I think that it is fair to say on their behalf that they are a responsible section of the community and that if their tax burdens were relieved it is quite possible that a large proportion of the extra money made available would be put into savings, which is exactly what the country needs.

Mr. Nigel Fisher: I fully agree with what my hon. Friend the Member for Ruislip—Northwood (Mr. F. P. Crowder) said, as indeed any hon. Member on this side of the Committee must. And also with the sincere and eloquent speeches of the hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) and my hon. Friend the Member for Louth (Mr. Osborne). Anybody on this side of the Committee must take that line about direct taxation in principle and also in support of my noble Friend's Amendment on the Surtax starting level. No one on this side of the Committee could, in principle, take any other line, but I must say that I do not really quite see what my hon. Friends can have expected this year, at this time, by way of tax concessions and reductions.
I thought that the points made by the Economic Secretary in reply to the debate on the Amendment were absolutely fair and perfectly reasonable. My right hon. Friend did not introduce a Budget of


reliefs or incentives. It was not his intention to do so. There were perfectly good reasons for his decision. The whole theme and purpose of the Budget has been anti-inflation and pro-saving. In that context, however desirable, from the point of view of hon. Members on this side of the Committee, may be the sort of measures of relief suggested by my hon. Friend the Member for Wycombe (Mr. John Hall), in a most eloquent speech, my right hon. Friend could not have conceded them. I do not think that we could really expect them this year.
It is perhaps an answer to the hon. Member for Stetchford (Mr. Roy Jenkins), who inquired why we had put down no Amendments to reduce the standard rate of income tax, that we are a responsible party. We realise that, had any concessions been made by my right hon. Friend this year, they would have opened the whole field of competing claims for relief. Cases would have been argued from both sides of the Committee for other sections of the community for which hon. Members thought it right to press claims. The whole field would have been opened up, and the whole purpose and theme of the Budget would have been vitiated and nullified.

Mr. Chapman: By the hon. Member's standards, was the Amendment on Surtax responsible?

Mr. Fisher: The hon. Gentleman has not followed what I have said. I fully agree with the argument, 100 per cent., but I think that the timing was unrealistic. I am very glad that these matters were brought forward for discussion. It was absolutely right to bring them forward. These matters should be discussed.

Mr. John Hall: Does not my hon. Friend agree that the timing for any tax reduction is nearly always wrong?

Mr. Fisher: That is a fairly easy generalisation to make, and of course it is always true, but it would have been quite out of context in the Budget this year to grant this sort of concession. My hon. Friend knows that. It is perfectly obvious from the whole trend of the debate.
I am very glad that these matters were discussed. They are well worth discussion, and they are too seldom discussed in this Committee. The point

made about the £630 a year and the £2,000 a year was most interesting. It was said that £630 a year was the prewar equivalent after tax of £2,000 a year after tax now. That is a horrifying thought. No one can say that a £630 a year man before the war was a rich man, or that a £2,000 man today is a rich man. My hon. Friends the junior Ministers are in receipt of incomes of £2,000 a year, and I am sure that they do not feel frightfully rich.

Mr. Norman Dodds: What does the hon. Gentleman propose to do about it?

Mr. Fisher: I think that on this the Government have been disgracefully mean. I cannot understand the reason. It is an absolute disgrace, and I feel very strongly about it.

The Temporary Chairman: To attack the Government on that is out of order on this Motion.

Mr. Fisher: I agree. I was quoting it merely as an example. I am sure that hon. Members on both sides who have been junior Ministers will sympathise and will feel that they are not in the category of very rich men today.
I hope that my right hon. Friend will pay sympathetic attention to the whole tenor of the debate, because when the time comes for reliefs of this sort—and I hope it will be next year—he should know our views. The sort of people about whom we have been talking are, like other sections of the community, entitled to some consideration for relief at the proper time. Many of them, as my hon. Friends have said, are the very people we ought to encourage most, because they are the wealth producers, the prosperity-producers in our economy. I hope that their claims, which have at last been discussed this year, will be granted next year.

Sir E. Boyle: I should like to thank the hon. Member for Surbiton (Mr. Fisher) for his kind reference to myself. I am glad that he found my arguments on this Budget more acceptable than he found some of my arguments at the end of last year. Listening to my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) I was a little reminded of a professor of history, Professor F. C. Montague, who said that there were


two subjects on which his knowledge was entirely derived from books, namely, love and war. I find myself in the same position, and I would add to that list poetry and horse racing, to which my hon. Friend referred.
I do not want to speak for long. We have had a very full airing of this subject of direct taxation, but there are one or two specific questions which I should like to answer. Three hon. Members opposite asked about the question of the relation between direct and indirect taxation. I must say that on this point I found myself in the minority, as it were, among hon. Members opposite, and very much in agreement with the hon. Member for Northfield (Mr. Chapman). I hope that the Committee will take due note of the significance of the very considerable increase in sales of consumer durables during the last few years.
Perhaps I might read a sentence or two from a speech which I made to the E.C.E. at Geneva only a short time ago. I said:
There is one point here which has struck me with special force when I have been studying what one might term the outturn for the British economy in 1955. The standard of living in the United Kingdom has now reached a point where a considerable section of the population who have gained from the growth in the national income during the last 15 years are now able to buy consumer durables such as cars, television sets, washing machines and so on. All these goods compete for the same kinds of labour and materials as are also needed both for export and for home investment.
That is a point of real economic significance. When we get something competing for the same resources as we need for home investment and export, it is only natural that the balance of indirect and direct taxation should be shifted to some extent.
A number of hon. Members also raised the question of production. I think the real point is that we have in this country today capacity for increased production. What happens this year will depend on how smoothly the process of redeployment goes on. I do not think there is much dispute that some redeployment of our resources was needed. The hon. Member for. Edmonton (Mr. Albu) made, as he always does, a most thoughtful and interesting speech. I should like, again very briefly, to answer one point he made.
I think he is a little unfair when he accuses this Government of a lack of purpose in economic policy. Can I put it in one sentence? We are finding this year that investment is going up pretty sharply, exports are rising, but consumption is pretty stationary. I do not think that by any standards that is a particularly unsatisfactory state to be in. I think the present economic indicators, as it were, show something like the improvements that we hoped they would show as a result of our policy last year.
7.30 p.m.
The hon. Member for Northfield said that we should do more to relieve taxation at the bottom end; that we do too much at the top end and not enough at the bottom. We have done something about that since we became the Government. After all, about 16 million people have had their Income Tax assessments reduced by the present Government, and at least 2 million have gone out of Income Tax altogether. Whatever else can be said about the Budgets of my right hon. Friend the Lord Privy Seal, nobody can possibly deny that he did a very great deal to relieve Income Tax payers at the bottom end of the scale.
Some Members have pointed out the importance of doing justice by all members of the community. That is certainly our view. I think it is recognised that the kernel of our Budget policy this year has been this very big Budget surplus above the line, running into the sum of £460 million—which is £63 million more than the actual out-turn above the line achieved last year. We believe that this Budget and this big surplus will lay the foundation for a more stable economy in the years ahead.
Having made those points, I hope that the Committee may feel able to come to a decision fairly soon upon the Clause, as we have had a full discussion on it.

Mr. Jay: I am provoked into speaking not so much by the speech of the Economic Secretary as by that of the hon. Member for Louth (Mr. Osborne). I was shocked to hear that the hon. Member's speech had been prematurely cut short. Even allowing for the growing liaison between the British Tory Party and certain totalitarian regimes abroad, it seems strange that the hon. Member


should be thus gagged. The hon. Member for Louth and other hon. Members opposite voiced the usual lament of the Tory Party about direct taxation in this country. They described it as penal, and argued that great damage was being done to our economy by the weight of Income Tax, that injustice was being inflicted upon the middle classes, and so on. Hon. Members opposite are getting all this out of perspective; indeed, it is in some ways precisely this attitude of theirs in wanting to cut direct taxation at all costs, which has been responsible for some of our country's difficulties in the last few years.
We in the Labour Party are far from thinking that Income Tax is perfect as it stands at the moment. First, it is less fair as between family and family than it is between one individual earner and another. Secondly, the tax is based much too narrowly upon the present legal definition of income, rather than the actual spending power of the individuals concerned. If any hon. Members opposite question that, I shall be tempted to quote from an important public statement made by Lady Docker since the last meeting of the Committee. Unless I am provoked, I shall desist from quoting it at any great length.

Hon. Members: Let us have it.

Mr. Jay: If hon. Members want to hear it I can quote it. It is here in a newspaper, accompanied by a photograph of Lady Docker and her husband, and a third individual whom I find it difficult to describe. Perhaps he is an Inland Revenue official in heavy disguise. Lady Docker said:
In … those six years…Our joint income"—
that is, of herself and her husband—
from the companies was £12,000 a year.
I assume that to be before taxation. Then she tells us, elsewhere:
Of course I got myself talked about.
Presumably, therefore, she will not mind being discussed here.
It cost me every penny of £20,000 a year of my own money.
I can only say that a married couple would have to have a remarkably large income if, after taxation had properly been paid, one member was able to spend £20,000 a year.

Nevertheless, despite these defects in our Income Tax system, we believe that the principle of progressive direct taxation is right, and is fundamental in any democratic society. I will give only two reasons for that. First—in view of the hon. Member's reference to Russia and other countries abroad—I would remind the Committee that many countries today who are uncommitted, and are wavering between Communism and the democratic system, are tempted by the physical success of the Russian economy. I believe that we have achieved far greater real equality than has the Soviet Union. I think that the Russian system of taxation is a most reactionary one. My information, based upon researches in Moscow a year ago, is that the highest rate of Income Tax in the Soviet Union is 25 per cent. It is difficult to obtain the facts correctly, but I believe that that is roughly the correct figure.
If we have achieved a greater degree of equality here, we have done it by means of progressive direct taxation; and if we are to convince these wavering countries that reasonable equality can be achieved by free and democratic methods, we have to show that progressive taxation works here, where Income Tax itself was invented—almost in a fit of absence of mind. No other way has been discovered anywhere in the world of achieving a reasonable economic equality, on which political democracy depends, except by progressive direct taxation something on the lines of the British model.
Secondly, the history of the past two years, and the mistakes of the Lord Privy Seal a year ago, have proved again that progressive Income Tax is an essential instrument for regulating the economy, checking inflation, and solving our balance of payments difficulties. We all know that the economy got out of hand a year ago because the Lord Privy Seal, spurred on by very much the sort of arguments which we have heard from hon. Members opposite today, made an unjustifiable reduction in Income Tax which pushed up our spending beyond what it was possible for the economy to afford.
We are still feeling the effects of those mistakes today, with the renewed weakness of sterling and with alternate panicky speeches, and reassuring speeches a few days afterwards from the Chancellor. I


have some sympathy with the Chancellor in his attempt to scare the trade unions without scaring the foreign exchange speculators. It might be better if he made fewer speeches altogether.
I did not quite agree with the very pessimistic language used by the hon. Member for Louth, who predicted an economic blizzard in the next twelve months, and spoke of our facing the worst crisis since 1931. Nevertheless, it is quite clear that this passion for reducing direct taxation at all costs has got us into great difficulties, from which we have not yet emerged. In the Budget debate the Chancellor thought it clever to defend the Lord Privy Seal by asking, in his mock heroic fashion, whether we thought it was such a wicked thing to reduce Income Tax. If the Chancellor could abandon these mock heroics and rise upwards, or drop downwards, to the level of serious economic argument, I would ask him two questions.
First, does he think that it is always right to reduce the standard rate of Income Tax, regardless of the circumstances in which it is done? Secondly, if he does not, does he think that April, 1955, was a good and wise moment to choose for a cut in the standard rate? If he cares to answer now I shall be glad to give way to him.

Mr. Osborne: Would the right hon. Gentleman put the Income Tax rate up now?

Mr. Jay: I am quite willing to answer that question. I think that the Lord Privy Seal would have been much wiser if he had reduced the allowances but left the standard rate where it was. If he had done that, I do not think that we should have had to make further changes now.
The kernel of the matter is this. If we are not going to slide into the economic disaster about which the Chancellor himself spoke a week ago—and that was his word—some restraint must be placed upon overspending. That restraint will not be accepted by the wage earners, in conditions of full employment, unless it is manifestly fair all round; and it can be made manifestly fair only by an effective system of progressive taxation. Therefore if a Tory Government, this year or any other year, tries to get out: of that dilemma by making unjustified cuts in Income Tax on the higher incomes, the wage earners will

press for higher wages, and we shall get back into precisely the situation in which we are now. That is the root of the situation.
Against that, what have hon. Members to say in support of their proposals for reductions? First, they say that the rate of Income Tax is too high and is crushing, and all the rest of it. I wonder how many hon. Members opposite realise that this rate of 8s. 6d. is far from being the actual effective rate which falls on the ordinary income. The actual rate given in the Inland Revenue Report—and this was before the reduction made last year—is 2s. 10d. per £ of actual income all over the community, which is a very different matter.
Again it is argued that there are these crushing effects on incentive, and we have discussed that a great deal this afternoon. I gave a quotation from the Royal Commission on its view about executives with higher incomes. It also carried out an inquiry, not just a theoretical argument, but an inquiry into the effect of direct taxation on incentives throughout the mass of earnings. The conclusion of that inquiry, which appears in an Appendix to the Report was this:
There was no evidence from this inquiry of productive effort being inhibited by the income tax structure within its present limits.
Then we were told by the hon. Member for Wycombe (Mr. John Hall) that there was some peculiarly devastating effect on what he called the middle classes, those with professional incomes and so on. We fully agree that there should be more help in that direction, particularly for those with earned incomes who have a large number of dependants. But I feel that when hon. Members opposite talk about the troubles of that very important section of the community, they entirely omit to mention the National Health Service. I believe that the National Health Service has done just as much to improve the standard of living of those in the middle income groups as higher Income Tax has done to depress it.
Much of the higher rate of Income Tax which we are discussing is really a payment for the National Health Service. It is health insurance, if hon. Members care to regard it in that way. I would far rather have the National Health Service,


and the existing rates of Income Tax, than go back to the pre-war rates of tax without the National Health Service. Not only does the Service get rid of doctor's bills, but the worry about them also.
The hon. Member for Louth argued—and this was an interesting part of his case—that the weight of taxation in this country is very much greater than in the United States. Though I am sure the hon. Gentleman honestly believes that, as do many other people, in fact it is by no means a fair and balanced statement of the truth. It is true that our system of direct taxation is more progressive than is the American system. I would not dispute that. But I do not think it true to say that direct taxation is higher here than in America.
To begin with, taxation on profits—I am now coming to the figures—is definitely still slightly higher in the United States than in this country. If we look at direct taxation on personal incomes in the two countries, I think that the figures given by the hon. Member for Louth do not reveal the whole picture; first, because he omitted the local taxes, and, secondly, for a reason which I will try to explain in a moment. I am giving these figures only because the hon. Gentleman gave some figures in his speech.
According to figures given to me by statisticians in Washington—I consider them well qualified to work out these things—if we take central and local taxes both here and in the United States, and counting in the American capital gains tax and our own Surtax, the proportion of personal incomes taken in direct taxation—I think this is the true comparison—works out at about 10 per cent, in the United States and 9 per cent. in this country. I have checked those figures against British official sources and American official sources in Washington, and they were not challenged.
7.45 p.m.
I think that the hon. Member for Louth was under an illusion, although he gave the right figures, in making his comparison of tax on actual incomes as between the two countries. Of course as the income per head in the United States is three times as high as in this country, if one gives the precise comparison of income translated at the existing rate of exchange, the effect is misleading. We have to take

the income at the same point in the scale in the two countries, what I would call the corresponding income. If that is done, we get a very different result.
I give the hon. Gentleman these figures, which are for central taxes only, as a comment on his figures. I take incomes at the same point in the scale. The lowest one which I would call corresponding is £500 in the United Kingdom for a married couple with two children—all these figures relate to such a family—and 5,000 dollars in the United States. At that level the British family pay no direct tax at all and the United States family pay 10 per cent. At the next level, £1,000 in this country and 10,000 dollars in the United States, the tax is 8½ per cent. here and 16 per cent. in America. To go up to the next level in the scale—I agree it is less progressive in the United States—at £5,000 here and 50,000 dollars in America it is 44 per cent. in the United Kingdom and 38 per cent. in the United States.
I think the hon. Gentleman will understand that an entirely misleading effect is obtained if we make a comparison between what is a low income in the United States and what is a very much higher one here. It is perfectly true, of course, that people go to the United States because there is a greater reward. But what I think the hon. Gentleman does not understand is that the greater reward is due to the fact that the whole scale of incomes is higher in the United States, and not because taxation is lower. Therefore, I ask hon. Members to keep some sense of proportion about this question of Income Tax.
As the hon. Gentleman gave us his views about what should be done in the future to amend the present situation, I will, very briefly, do the same. We think the following are the directions in which the system could be improved. First, there ought to be some adjustment to allow for income per head in the household rather than the income for each single earner—that is to say, more allowances for dependants. Secondly, there should be some exemption at the lower end of the scale where, so far as I can see, about 5 million people are paying tiny amounts which are hardly worth collecting.
Thirdly, the tax ought to be based more on the individual's real spending


power and less on the present rather narrow legal definition of income. Fourthly, we believe—and we agree here with hon. Gentlemen opposite—that there ought to be more encouragement for saving and discouragement for spending all the way up the scale. Fifthly, it seems to us that, gradually, over the years, the weight of direct taxation ought to be made to fall less heavily on personal incomes and more heavily on business profits. With those improvements, I believe that the British Income Tax, which, after all, is the main support of all our Welfare Services, could be made an extremely powerful instrument for further social progress.
Question put and agreed to.
Clause ordered to stand part of the Bill.

Clause 8.—(RELIEF FROM INCOME TAX ON CERTAIN SAVINGS BANK INTEREST.)

Mr. Roy Jenkins: I beg to move, in page 8, line 11, after "bank", to insert:
or with the Birmingham Municipal Bank.

The Temporary Chairman: I think it will be convenient if this Amendment and that in page 8, line 29, at end insert:
Provided that, where by virtue of this subsection the amount of surtax payable by an individual would exceed the sum of

(a) the amount of surtax which would have been payable by that individual, if this subsection had not been passed, and
(b) the amount of relief, if any, to which that individual is entitled by virtue of the foregoing subsection,

that excess shall be disregarded for all the purposes of the Income Tax Acts.
(3) The two foregoing subsections shall apply in respect of interests on deposits with a municipal bank as they apply in respect of Interest on deposits with the Post Office savings bank.
were taken together, and a separate Division taken on each if desired.

Mr. Jenkins: Yes, Mr. Bowles.
It may seem that this is a slightly parochial Birmingham Amendment, but there is no reason for thinking that. The Birmingham Municipal Bank is to some extent a unique institution, in that it is not incorporated under the Companies Act, as are other municipal banks, but under the Birmingham Corporation Act, I919. No other corporation has exactly such powers, although I believe that Cardiff and Birkenhead have slightly more

restricted powers under an Act of 1929, which, I believe, they have not used.
The Birmingham Municipal Bank, therefore, stands in a position slightly different from that of any other institution. It was founded in 1919 and has since had a very successful 37 years of history. Its deposits at present are approximately £88 million. That is a very large sum indeed, because it is equivalent to an average deposit of practically £80 for every man, woman and child in the area which it serves, and that does show for a bank for small savers of that sort a high rate of coverage. There are 720,000 depositors.
There is a great deal of civic pride in the fact that this is, to some degree, a unique and very successful institution, and it is also, without doubt, a most important part of the savings movement in Birmingham. School savings groups and factory savings groups are to a large extent conducted through the Birmingham Municipal Bank. There is a further important point which to some extent underlines the uniqueness of the Birmingham Municipal Bank. There is within the city of Birmingham not a single branch of the trustee savings banks. They do not exist in Birmingham. The Birmingham Municipal Bank acts in their place.
The large question which then arises is as to what department of the trustee savings banks is the Municipal Bank more akin. Is it more akin to the ordinary department of the trustee saving banks, to which the Chancellor's concession applies, or to the special investment department to which the concession does not apply? It is my belief that the Birmingham Municipal Bank is a great deal more analogous to the ordinary department of the trustee savings banks. Those banks get £2 17s. 6d. per cent. from the National Debt Commissioners and pay 2½ per cent., the Municipal Bank earns a little more—£2 19s. per cent. and pays depositors slightly more, 2¾ per cent.
There can be no question, however, of the Birmingham Municipal Bank, with its present investment policy—which is pretty tightly controlled by the Treasury—earning substantially more and getting round the disadvantage of not being able to offer the Income Tax concession by offering a higher rate of interest to


depositors. The ordinary department of the trustee savings banks automatically has all its deposits with the National Debt Commissioners.
This is not the theoretical position with the Birmingham Municipal Bank, but the practical position is not very different. Of the £88 million of assets, more than £60 million—£66 million, I believe—are held in the form of Government securities. The remainder is partly cash, partly small amount advances to house purchasers in Birmingham—£6 million—and the rest is represented by loans to the Birmingham municipality which are backed by physical assets
This last item has not increased for many years. There is no question of increasing it at present, and, indeed, except for that small proportion of advances to house purchasers, all surplus money goes, as with the trustee savings banks, into Government securities. Over this investment policy generally there is, as I indicated earlier, a close degree of Treasury control. It therefore seems to me that as the position now stands the Municipal Bank is at least 90 per cent. analogous to the ordinary department of the trustee savings banks rather than to the special investment department.
I think that there is a most strong case for the inclusion of the Municipal Bank, as it stands, within the Chancellor's present concession, but I and those associated with me in this Amendment recognise the Chancellor's difficulties here. One of the difficulties about making the concession is that a lot of others would want it as well. Therefore, in order to try to make the Chancellor's position rather easier, the Birmingham City Council is prepared—if we cannot get this direct inclusion, for which, as I have said, there is a very strong case, and which would be much more welcome than anything else—to go further and to set up a new department to which it is suggested that the tax concession should be applied and which would in all relevant respects be the equivalent of the ordinary department of the trustee savings banks.
The essence of such a scheme would be this. In the first place, the interest to depositors in this new department would be only 2½ per cent., and all excess deposits would be automatically paid over to the

National Debt Commissioners. The Municipal Bank would receive from the National Debt Commissioners the same return, £2 17s. 6d. per cent., which the ordinary department of trustee savings banks at present gets. There would be a limit to deposits, whether new or transfers from the existing department of the Municipal Bank of, perhaps, £1,000—or whatever figure was thought to be appropriate. With the exception of these new regulations as to investment policy, interest on deposits and limitation of deposits, which would, I think, meet all the Chancellor had in mind when he first introduced the concession, all the present regulations of the Municipal Bank would continue to apply equally to the new department.
That is to say, for the purpose of every consideration relevant to what the Chancellor had in mind when he introduced the general concession, the department would be an ordinary department of the trustee savings banks, but it would not be one in name or for considerations really irrelevant from this point of view. To make it one in name would raise great complications about the ownership of buildings and the showing of administrative expenses, and would also destroy a very real feeling of civic pride in the particular traditions of the Birmingham Municipal Bank.
There is another point. If the scheme were accepted, I think it swould be the assumption that, of course, some of the assets backing the existing deposits would need to be taken over by the National Debt Commissioners. The assumption and the hope would certainly be that a fair cross-section of the marketable securities at present held would be taken over at book value, which is, broadly speaking, at cost, so that there would be no loss involved. On this assumption, the Birmingham Municipal Bank would be willing to negotiate a detailed scheme with representatives of the Treasury or with the National Debt Commissioners.
I hope very much that the Chancellor will be able to say that he agrees that this could be done and that any necessary Amendment can be made on Report. At the same time, I hope that the Chancellor and the Committee will be left in no doubt that from the point of view of the interest in the Bank at Birmingham of all shades of political opinion the outright application of the concession to the


Bank as it stands would be a great deal more acceptable and would cause a great deal less trouble.
If necessary, however, we would have this compromise arrangement, to which I greatly hope the Chancellor will be able to agree, as there is an urgent practical problem here. There is a real danger that if the concession is not extended to the Municipal Bank, fulfilling as it so largely does in Birmingham the normal functions of the trustee savings banks, there will be withdrawals of money in order to get the Income Tax concession elsewhere.
8.0 p.m.
I am afraid that the figures which are already available provide a certain amount of evidence that this is happening. For instance, in the two months April and May, 1955, there was in the municipal bank an excess of deposits over withdrawals of £70,000. In April and May this year there was an excess of withdrawals over deposits—the very opposite to 1955—of £328,000. Those are very serious figures. It may possibly be suggested that they have more to do with short-time working in the motor industry than with the tax concession. I thought of that myself when the figures were first put before me. I do not think that is so, however, because a closer examination of the figures shows that the withdrawals have taken place to a greater extent than elsewhere in those parts of the city where one would expect most depositors to be taxed fairly highly and therefore to be most sensitive to tax concessions. That is where one would also expect them to be most aware of the alternative investment opportunities.
I expect that a large part of this change since 1955 is due to the difficulty created by the Chancellor's partial concession. This is, and might become to a still greater extent, a very serious matter for the bank. But it is also to a greater extent a very serious matter for the Government, because the Chancellor's Budget was intended to be a savings Budget. When this money was withdrawn from the Birmingham Municipal Bank, we did not know where it was going. Some might go to the Post Office Savings Bank and would, therefore, get a concession. Other parts might go into building societies. That is less suitable from the Chancellor's point of view than the

municipal bank. Some, in rather exceptional cases, might go into industrial ordinary shares. A lot might be spent, after being withdrawn from the bank, without being invested anywhere.
I put it to the Chancellor that this is a very serious practical problem. Paradoxically there is a real danger that his concession—no doubt, intended to help—because of a peculiar local condition in the second city of this country, far from helping savings may actually strike a very severe blow at the savings movement. I wish the Chancellor could accept the Amendment as it stands. If he cannot do that, I hope that at least he will indicate that on the basis which I have put forward, having discussed the matter with the representatives of the Birmingham City Council, discussions can go ahead and a compromise solution may be possible.

Sir E. Boyle: I think it might be for the convenience of the Committee, as will emerge in the course of my remarks, that I should rise at once on this matter.
The hon. Member for Stechford (Mr. Roy Jenkins) has raised a matter of great local importance to the City of Birmingham and, I quite agree, of considerably wider import as well. I should like to explain first why Clause 8 was drafted as tightly as it is, and secondly why my right hon. Friend could not accept the Amendments that we are now discussing; and finally I should like to make a proposal to the Committee which, in view of what the hon. Gentleman has said, I think may be accepted.
My right hon. Friend has already received a deputation of Birmingham Members of Parliament from both sides of the Committee, who presented very ably the case for including the Birmingham Municipal Bank within the scope of the proposed relief. Of course, there are also a number of other smaller municipal banks, most of them in Scotland. I think I should go through the arguments as I understand them, and try to meet them as fairly as I can.
The first argument put forward is this: these municipal banks are the most important savings institutions in their neighbourhood, and they play a leading part—as they certainly do—in the work of the National Savings Movement by accepting the deposits of savings groups and schools, and also selling National


Savings certificates to their depositors. That is perfectly true. At any rate, it is true of the Birmingham Municipal Bank.
The special investment departments of the trustee savings banks may have been properly regarded as part of the National Savings Movement because their deposits are included in the National Savings figures. Nevertheless, they are excluded from the scope of the proposed tax relief.
I think the other argument that has been advanced by the hon. Gentleman, who put this point with some force and perfect justice, was that if these municipal banks are excluded from tax relief they are liable to suffer withdrawals which may result in their having to realise securities at a loss, and, after all, they do invest part of their deposits in Government securities.
Money invested in the Post Office Savings Bank and in the ordinary departments of the trustee savings banks is not only saved but it is effectively lent to the State. If I may use an illustration which the Chancellor has occasionally used before in speeches and in conversations, if we think of the volume of money in the country as water in a bath, this is water which is frozen by being lent to the State. Accordingly, the tax relief proposed for interest on these deposits is intended to enable more of the State's borrowing needs to be financed in ways which do not increase the liquidity of the joint stock banks.
Deposits in the municipal banks are lent to local authorities or are used to buy market securities in a number of places. The mere fact that part of a bank's deposits may be invested in marketable Government securities does not mean that an increase in their deposits necessarily helps the Government's monetary policy. This is important; indeed, it is the kernel of the matter. My right hon. Friend's Budget is a savings Budget, and in a wider sense it is a funding Budget. The aim of a large number of the proposals of my right hon. Friend is to keep a curb on the supply of money. That is why we want money not only to be saved but also to be lent to the Government.
The hon. Member for Stechford proposed that the Birmingham Municipal Bank might secure the benefit of this Clause by forming a separate department,

as a trustee savings bank, which could lend its deposits to the Exchequer, or even by transforming itself into a trustee savings bank if this were practicable.

Mr. Roy Jenkins: I am not sure whether there was a slip of the tongue, but the proposition which I meant to put was that the Birmingham Municipal Bank should set up a separate department which, from all relevant points of view, would be the same as a trustee savings bank but would not be called a trustee savings bank.

Sir E. Boyle: I think the best thing would be if I spoke on behalf of my right hon. Friend at this point, explained what my right hon. Friend would be prepared to agree to, and then left it to hon. Members to see if this squares with what they are proposing. I do not want there to be any ambiguity about this. The suggestion has been made that a possible solution might be for the Birmingham Municipal Bank to form a separate department which could lend its deposits to the Exchequer, and the practical value of the suggestion is that a separate department of this kind could get the benefit of Clause 8 without any change in its present scope if the department were formed as a trustee savings bank.
My right hon. Friend sees no objection to the proposal that the formation of a separate unit as a trustee savings bank should be examined, and the Controller-General of the National Debt Office would be happy to go into the question with the City Treasurer or the General Manager of the Birmingham Municipal Bank. It is also open to other savings banks or societies to examine their position in the same way. This is the proposal which my right hon. Friend makes to the Committee, and I hope that in the light of what I have said, hon. Members opposite may agree to withdraw the Amendment.

Mr. Shurmer: Does the hon. Gentleman mean that the Chancellor is prepared to accept this proposal put forward by my hon. Friend the Member for Stechford (Mr. Roy Jenkins) and that as a result of negotiations with the Municipal Bank officials, the bank would continue to be run by the same committee, or would there be two separate departments?

Sir E. Boyle: The point is that the Municipal Bank should form a separate department which should lend its deposits to the Exchequer.

Mr. Julius Silverman: I should like to be quite clear about that last point. If it simply boils down to this, that the Birmingham Municipal Bank should create a separate department, at a rate of interest standard with that in the Post Office Savings Bank and the trustee savings banks, and should lend that money to the Government—if that is the economic substance of what the Chancellor wants—I am sure there could be agreement on that basis.
The only point is this. There is some difficulty, as regards the form of it, in the creation of a trustee bank. As I think the right hon. Gentleman appreciates, we have this Municipal Bank, which is an important and integral part of the life of the city. I am sure the right hon. Gentleman knows this, because a very large number of its depositors, some 66,000 I understand, are in his own constituency. In all, there are, throughout the city, 68 branches of the bank, and it is quite true to say that it is an integral part of the life of Birmingham and of the savings movement in Birmingham. I do not want to go into detail as to the part which the bank has played in the National Savings Movement. I think the Chancellor will agree that it has been regarded as an integral part of the National Savings Movement. During the war, a sum of about £38 million was raised for the Government and deposited, through the instrumentality of the National Debt Commission, in Government securities. In view of what has been said, I will go no further into that.
The difficulty which has attended the form of this suggestion so far, that of the trustee bank, is this. There is, obviously, a great municipal and civic pride in the bank, and a desire that the citizens of Birmingham, through the bank committee, should have a complete and democratic control over the institution. If a trustee bank, in what I understand to be the usual form, were created, inevitably there would be trustees and other people who would control the detailed administration. This would create all the difficulties which my hon. Friend the Member for Stechford (Mr. Roy Jenkins) has already referred to.
If I understand aright, it has been indicated by the Chancellor already, and, I think, by the Economic Secretary, that the Treasury will be content with the economic substance of what we want. On that basis, I am quite sure that agreement could be reached. I am sure that Birmingham will welcome that concession very much, and I am quite sure that the details of negotiation, with good will on both sides, can be agreed.

Sir E. Boyle: I thank the hon. Gentleman the Member for Aston (Mr. J. Silverman). I am sure we agree about the economic substance, which is the rate of interest and that these deposits should be lent to the Exchequer. I have every hope that the procedural points, to which the hon. Gentleman has rightly referred, can be ironed out, as it were, through negotiation.
Until we are agreed on those procedural points, I hope that hon. Gentlemen opposite will agree to withdraw their Amendment. We will try to get this finally tidied up on the Report stage.

Mr. Chapman: As the Economic Secretary knows, this is the compromise which I put forward a few months ago, and I have therefore been very interested to see it worked out. I am very grateful to him for accepting it.
Could he say whether, in this scheme, it will be possible to make some arrangement about the covering of existing deposits by the securities already held by the bank? In other words, I take it there will not be any need to start new deposit accounts for people moving in as from now, but the thing can be taken over on its past basis?

Sir E. Boyle: The hon. Gentleman has raised a very fair point. My right hon. Friend has taken a strong interest in this matter ever since the subject was first raised.

Mr. G. R. Mitchison: On a point of order. I understand that we are at the moment referring to, or discussing, also the Amendment which concerns not only Birmingham but some other places as well, namely, the Amendment which appears at the bottom of page 3365, standing in the name of my right hon. Friend the Member for Rochester and Chatham (Mr. Bottomley). If the Birmingham Amendment, if I may so call it,


is withdrawn, shall we then be able to discuss my right hon. Friend's Amendment?

8.15 p.m.

The Deputy-Chairman: In view of the way the proceedings are going, I think that I will allow the right hon. Gentleman the Member for Rochester and Chatham (Mr. Bottomley) to move his Amendment. What I was told to do by the Chairman of Ways and Means was to have a debate on both these Amendments together and then, if the right hon. Gentleman wished, he could have a separate Division. But I think the situation has changed now.
Does the hon. Member for Stechford (Mr. Roy Jenkins) wish to withdraw his Amendment?

Mr. Roy Jenkins: In view of what has been said, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.

Mr. A. G. Bottomley: I beg to move, in page 8, line 29, at the end to insert:
Provided that, where by virtue of this subsection the amount of surtax payable by an individual would exceed the sum of

(a) the amount of surtax which would have been payable by that individual, if this subsection had not been passed, and
(b) the amount of relief, if any, to which that individual is entitled by virtue of the foregoing subsection,

that excess shall be disregarded for all the purposes of the Income Tax Acts.
(3) The two foregoing subsections shall apply in respect of interests on deposits with a municipal bank as they apply in respect of interest on deposits with the Post Office savings bank.
Perhaps I ought to disclose at once that I have an interest. As a matter of fact, in one of the banks mentioned in a subsequent Amendment, the Walthamstow Savings Bank Limited, I was a founder member and, in addition, a director. Perhaps I ought to explain that the shareholders, as such, were members of the borough council, forty-eight of them, and they were the only shareholders. They were allowed one 1s. share only. From the shareholders, directors were elected and I was one of those fortunate persons. But on no account was profit to be paid, either to shareholders or to directors, or remuneration of any kind. The town clerk was made secretary, and the borough treasurer was the finance officer.
The purpose of municipal banks—I cite the Walthamstow Bank as an example, though it applies to others—was to encourage ratepayers to deposit their money with these local savings banks in order to avoid the necessity of the borough treasurer going outside the town to borrow money at much higher rates of interest than would apply if the sums could be lent at a cheaper rate of interest within the borough. By that means, the ratepayers received a two-fold benefit. They were able to invest and get interest on their money from the local savings bank, creating local civic pride and enterprise, and, in addition, by lending the money to the local authority, they obtained a benefit by lower rate charges, because the authority could avoid going outside and paying higher interest rates.
These savings banks are a very good means of encouraging local patriotism. All of us, as democrats, I am sure, appreciate the importance of having local democracy as strong as possible, and this is one way in which it can be fostered, and by which greater interest in an area can be created. I should hate to see anything done which would destroy this kind of savings movement. I am bound to say that, at the moment, as a result of the Chancellor's decision in the Budget. there is a general trend to take money away from local savings banks, or there will be, as soon as it becomes known that interest in the Post Office and the trustee savings banks is tax-free.
It would be wrong to destroy this local initiative and patriotism, and I hope that the Economic Secretary will see some way in which the savings banks named in this Amendment can receive the benefit of the arrangements which have been made in the case of the Birmingham Municipal Bank. I am quite sure that if that were done he would be doing a service to all who want to see the successful development of local government, and I know that it would please all those banks which are named in my Amendment.

Mr. Mitchison: I want to urge a rather broader point than has been answered so far. The Amendment raises two matters. The first is under the proviso at the beginning of the Amendment. The reason that proviso is there is that the Clause, which is supposed to confer benefit on everyone, is so drawn that in


most exceptional cases a taxpayer can actually be a loser under it. Accordingly, either that matter has to be put right or there has to be a Money Resolution to support any Amendment. This and other Amendments appear on the Order Paper in this form because of that difficulty.
I said "most exceptional cases." The exceptional circumstances in this case appear to be a highly philoprogenitive Surtax payer. If such a gentleman had managed to have twenty children and, therefore, Income Tax allowances amounting to £2,000, he would not benefit by the Income Tax concession and would be made to pay more Surtax because the £15 with which we are dealing is grossed up.
Such a gentleman appears to me to be a very remote possibility. I propose to christen him "Mr. Money Resolution". Mr. Money Resolution, of course, would have to have rather more than twenty children and we had better give him a housekeeper's allowance, or make him, at the end of his arduous efforts, dependent upon his daughter, or something of that sort; or possibly Mrs. Money Resolution is given to having twins or triplets.
It is rather regrettable that the procedure of the House of Commons is such that a very remote possibility of that sort impedes the Amendments which we can put down, and makes us add to them additions that really ought not to be necessary. I always regard the Treasury as knowing everything, but I am inclined to think that if I were to ask the Chancellor of the Exchequer how many Surtax payers have twenty children qualifying for children's allowance, he would probably say that the information was not available or could not be obtained at any cost that made it worth while obtaining it. That is why the proviso is included and what is intended to be a purely beneficial concession might in some cases lead to this rather remarkable result.
To turn to something, if I may so put it, rather more serious, I come to the main point in my right hon. Friend's Amendment. This is really an attempt to get the Government to consider in this matter something more than the question whether the funds of these banks are invested in Government funds or in some

form or another lent to the Government. A concession has just been made to one of them, the Birmingham Municipal Bank, which depends entirely on that assumption. I quite agree that during Second Reading the right hon. Gentleman himself, and even more clearly the Economic Secretary at a later stage, made it clear that that was one, at any rate—the main and, perhaps, the only one foundation for this limitation of the concession with regard to the £15.
I now ask the right hon. Gentleman to consider what these banks are doing. First, there can be no doubt that they are undoubtedly promoting savings. Secondly, they are unlikely to exist unless the facilities for promoting savings in the places where they are have not in practice proved quite sufficient. With the exception of the Birmingham Municipal Bank, which we have dealt with, the others are, I believe, all in the form of private companies—companies, at any rate—formed without any formal connection with the local authority, but formed at the wish of the local authority, with directors and shareholders who are, in effect, the nominees and, in effect though not in form, the trustees of the local authority. Their purpose is to collect the local savings and to lend them to the local authority. They no doubt do other things too. Their investment, I am sure, is not confined to that, but that is the main purpose of them.
That, too, was the original purpose of the Birmingham Municipal Bank, and I do not think it has been wholly departed from. I believe that the Birmingham Municipal Bank still lends considerable sums of money to the corporation. These other small banks, however, are in a different kind of place. The lead in this matter was given by Kirkintilloch. It was followed by a number of other Scottish banks and, finally, by Walthamstow and Barnsley, in England; and there may be others. I say frankly that I hope, particularly if this concession is extended to them, that more of these banks will be formed. The Amendment is so drawn as to allow of their admission, if they are formed, to the benefit of this tax-free £15.
The point I have in mind about them is this. It is, after all, not only the Government who stand in need of money


lent to them, and not only the Government that is at present spending public money. The local authorities are in sore need of any money that they can raise locally and use for their purposes. Be it remembered that those purposes are not just at the discretion of the local authority. These loans are primarily in respect of capital expenditure, for which the local authorities concerned will have to get loan sanction. They are, therefore, a closely controlled expenditure. Their revenue expenditure is normally met out of the rates. These loans serve a different purpose.
I should like to remind the right hon. Gentleman and the Economic Secretary of the difficulties to which local authorities have been put, and I do it for this reason. The effect of this concession, unless it is extended to banks of this type, will be that money will be withdrawn from them and passed, perhaps, into the Post Office Savings Bank or, at least, into some other form of Government investment where it will get a tax-free concession of some sort.
Is that really desired? At present, local authority expenditure is running at the rate of about £400 million a year, three-quarters of which is raised through the Public Works Loan Board. Recourse to the Public Works Loan Board has, by the policy of this Government, been limited considerably in recent months. The result is that all local authorities are finding it difficult and expensive to raise the money that they need to do their duty. That, of course, is no news to the Government.
The present position is that the large local authorities, and only the large ones, can go to the public market. They can make public issues. They can, as happened in the case of Newcastle, place some stock on the market. That is possible in practice only for the large local authorities. Kirkintilloch, Clydebank, Airdrie, Motherwell, Walthamstow, Barnsley—none of them, I should think, is a local authority which would be in a position to have recourse to that method of borrowing.
I am talking about the capital expenditure of local authorities during an average year, which I put at round about £400 million, and in the last four months, since this matter became practicable and

necessary, borrowings on the market, as compared with that expenditure, have amounted to between £14 million and £15 million. Roughly speaking, only about one-tenth of the requirements of local authorities can be raised at that rate on the market, and the only local authorities which will be able to raise money in that way will not be the ones which have these small banks. They will be the large local authorities. I am not referring to Birmingham when I say "small". I mean the others.
8.30 p.m.
What else can they do? They must have this money. They have to carry on their duties. They have to get loan sanction for it, and, therefore, they are spending money for purposes of which the Government approve, and to an amount of which the Government approve. Yet at this moment one method of raising that money will be taken away.
What are the alternatives? One alternative, which is, I understand, encouraged by the Government, at any rate approved of by the Government so far as it goes, is for these smaller local authorities to raise money by mortgages. In effect, that means raising money on local market. A local market has two disadvantages. It is very often the small authorities which find the greatest difficulty in raising money which want it most, and they are just the authorities that will not be able to raise it at all easily in the form of mortgages locally. Another difficulty is that, on any view of the matter, the mortgage market is hopelessly insufficient.
What are they to do? They are told they cannot raise the money in any other way. They can go to the Public Works Loan Board. Their borrowing is very tightly tied there. Moreover—I call the attention of the Economic Secretary to this—the rates which they have to pay, whether on mortgages, which are running at from 5 per cent. to 6 per cent. nowadays, or to the Public Works Loan Board, whose rates are also about 5 per cent. and 6 per cent. are exceedingly high. They are cramping the activities which these local authorities ought to be able to undertake.
Here is an instance of a real bit of public enterprise, which has been going on for some time, which was started under municipal auspices in the way I


have described. Whether we look at this question from the point of view of economics or from the point of view of the social advantage of the country, it is exceedingly short-sighted at the moment to limit the concession merely to those banks which lend directly to the Government and to refuse to concede it to those institutions which, in a small way and in some cases, are lending for the benefit of the local authorities.
If the Government want to limit the activities of local authorities, to make it difficult or impossible for them to do some of the things which they are doing and which they, as elected bodies, believe to be for the good of the people in their areas, then the right way to do it is to say so. I cannot believe that to be the specific intention of the Bill. Surely, these are small savings, exactly what the Government intend to encourage? I thought that this was meant to be a savings Budget. The purpose of lending the savings to the local authorities is just as justifiable, and in present circumstances, caused largely by Government policy, as necessary and as advantageous to the country as lending them to the central Government, in the case of trustee savings banks and the like.
I therefore ask the Chancellor and the Economic Secretary whether it is really wise or quite fair to restrict concessions in the way in which they have said they are going to do. Is it too late—I hope not—to look at the matter a little more widely and, having regard to the need to encourage saving and the difficulties of local authorities, to extend the concession rather further than perhaps was at first intended?

Sir E. Boyle: I may be able to save the time of the Committee, provided that I do not get out of order in doing so. I have explained, in our debate on an earlier Amendment, the concession that my right hon. Friend the Chancellor has felt able to agree to in the case of Birmingham. There is no reason why a similar suggestion should not be made to the other savings bodies in whose favour Amendments have been placed on the Order Paper.
The suggestion made by the hon. Member for Stechford (Mr. Roy Jenkins), to which, on behalf of my right hon. Friend,

I agreed, could equally well have been accepted from the right hon. Member for Rochester and Chatham (Mr. Bottomley), if the co-operative societies had chosen to ask for it, from the right hon. Member for Huyton (Mr. H. Wilson), who has an Amendment on the Order Paper dealing with societies registered under the Industrial and Provident Society Acts, or from the right hon. Member for South Shields (Mr. Ede), who has a special interest in friendly societies. That is to say, it is open to other savings banks or societies to examine their position in the same way, and to consider the forming of a separate department as a trustee savings bank which could lend its deposits to the Exchequer.
I should like to make two points in reply to the hon. and learned Member for Kettering (Mr. Mitchison). On procedure, as he knows, we have done our best at the Treasury to allow a debate. We are grateful to him and to Parliamentary counsel for the work which they have done to enable us to debate the subject. My right hon. Friend was anxious not to avoid a debate by reason of a technicality.
I explained that we want this money to be lent to the Government in accordance with my right hon. Friend's general policy of funding, of trying to limit the volume of money in circulation. I take the hon. and learned Member's points about local authorities, and I am sure that they will be carefully considered, but that does not alter the question of principle, which is that money should not merely be saved but lent to the Government. In view of my explanation, I hope that the Amendment will be withdrawn.

Mr. Mitchison: We regard that reply as quite unsatisfactory. We have been offered a Procrustean bed into which some banks may, to some extent, be able to fit, but we see no reason to cut the beneficent activities of these banks in this way. We see no reason to deprive local authorities of the advantages of equality which they have hitherto had. Having regard to the Government's financial policy and its effect upon local authority finance at the moment, to the need to encourage local authorities, and to the general need not to discourage some form of saving because it does not happen to fit into the Procrustean bed, we propose to divide the Committee.

Question put, That those words be there inserted:—

The Committee divided: Ayes 177, Noes 229.

Division No. 202.]
AYES
[8.40 p.m.


Ainsley, J. W.
Hamilton, W. W.
Parker, J.


Albu, A. H.
Hannan, W.
Parkin, B. T.


Allen, Arthur (Bosworth)
Hastings, S.
Paton, John


Allen, Scholefield (Crewe)
Hayman, F. H.
Price, J. T. (Westhoughton)


Baird, J.
Henderson, Rt. Hn. A. (Rwly Regis)
Price, Philips (Gloucestershire, W.)


Bellenger, Rt. Hon. F. J.
Hobson, C. R.
Probert, A. R.


Benn, Hn. Wedgwood (Bristol, S. E.)
Holmes, Horace
Proctor, W. T.


Benson, G.
Howell, Charles (Perry Barr)
Pryde, D. J.


Beswick, F.
Howell, Denis (All Saints)
Randall, H. E.


Blackburn, F.
Hoy, J. H.
Rankin, John


Blyton, W. R.
Hubbard, T. F.
Redhead, E. C.


Boardman, H.
Hughes, Emrys (S. Ayrshire)
Reeves, J.


Bottomley, Rt. Hon. A. G.
Hunter, A. E.
Reid, William


Bowden, H. W. (Leicester, S.W.)
Hynd, H. (Accrington)
Roberts, Albert (Normanton)


Boyd, T. C.
Irvine, A. J. (Edge Hill)
Roberts, Goronwy (Caernarvon)


Braddock, Mrs. Elizabeth
Irving, S. (Dartford)
Robinson, Kenneth (St. Pancras, N.)


Brockway, A. F.
Isaacs, Rt. Hon. G. A.
Rogers, George (Kensington, N.)


Broughton, Dr. A. D. D.
Janner, B.
Ross, William


Burton, Miss F. E.
Jay, Rt. Hon. D. P. T.
Shinwell, Rt. Hon. E.


Butler, Herbert (Hackney, C.)
Jeger, George (Goole)
Short, E. W.


Butler, Mrs. Joyce (Wood Green)
Jeger, Mrs. Lena (Holbn &amp; St. Pncs, s.)
Shurmer, P. L. E.


Castle, Mrs. B. A.
Jenkins, Roy (Stechford)
Silverman, Julius (Aston)


Champion, A. J.
Jones, David (The Hartlepools)
Skeffington, A. M.


Chapman, W. D.
Jones, Jack (Rotherham)
Slater, Mrs. H. (Stoke, N.)


Chetwynd, G. R.
Kenyon, C.
Slater, J. (Sedgefield)


Clunie, J.
Key, Rt Hon. C. W.
Sorensen, R. W.


Coldrick, W.
King, Dr. H. M.
Sparks, J. A.


Collick, P. H. (Birkenhead)
Lawson, G. M.
Steele, T.


Collins, V. J.(Shoreditch &amp; Finsbury)
Ledger, R. J.
Stewart, Michael (Fulham)


Corbet, Mrs. Freda
Lever, Leslie (Ardwick)
Stokes, Rt. Hon. R. R. (Ipswich)


Cove, W. G.
Lewis, Arthur
Stones, W. (Consett)


Craddock, George (Bradford, S.)
Lindgren, G. S.
Strachey, Rt. Hon. J.


Cronin, J. D.
Logan, D. G.
Summerskill, Rt. Hon. E.


Crossman, R. H. S.
MacColl, J. E.
Sylvester, G. O.


Cullen, Mrs. A.
McGovern, J.
Taylor, Bernard (Mansfield)


Darling, George (Hillsborough)
McInnes, J.
Taylor, John (West Lothian)


Davies, Stephen (Merthyr)
McKay, John (Wallsend)
Thomson, George (Dundee, E.)


Deer, G.
McLeavy, Frank
Thornton, E.


de Freitas, Geoffrey
Mahon, Simon
Tomney, F.


Delargy, H. J.
Mallalieu, E. L. (Brigg)
Turner-Samuels, M.


Dodds, N. N.
Mallalieu, J. P. W. (Huddersfd, E.)
Ungoed-Thomas, Sir Lynn


Dugdale, Rt. Hn. John (W. Brmwch)
Mann, Mrs. Jean
Viant, S. P.


Ede, Rt. Hon. J. C.
Mayhew, C. P.
Warbey, W. N.


Edwards, Rt. Hon. John (Brighouse)
Messer, Sir F.
Weitzman, D.


Edwards, Robert, (Bilston)
Mitchison, G. R.
Wells, Percy (Faversham)


Edwards, W. J. (Stepney)
Morris, Percy (Swansea, W.)
Wells, William (Walsall, N.)


Evans, Albert (Islington, S.W.)
Mort, D. L.
West, D. G.



Moyle, A.
Wheeldon, W. E.


Fienhurgh, W.
Neal, Harold (Bolsover)
White, Henry (Derbyshire, N.E.)


Fletcher, Eric
Noel-Baker, Francis (Swindon)
Wilkins, W. A.


Forman, J. C.
O'Brien, Sir Thomas
Willey, Frederick


Fraser, Thomas (Hamilton)
Oliver, G. H.
Williams, W. R. (Openshaw)


Gaitskell, Rt. Hon. H. T. N.
Oram, A. E.
Williams, W. T. (Barons Court)


Gibson, C. W.
Orbach, M.
Willis, Eustace (Edinburgh, E.)


Gordon Walker, Rt. Hon. P. C.
Oswald, T.
Wilson, Rt. Hon. Harold (Huyton)


Grey, C. F.
Owen, W. J.
Woof, R. E.


Griffiths, Rt. Hon. James (Llanelly)
Paling, Rt. Hon. W. (Dearne Valley)
Yates, V. (Ladywood)


Griffiths, William (Exchange)
Paling, Will T, (Dewsbury)
Younger, Rt. Hon. K.


Hale, Leslie
Palmer, A. M. F.



Hall, Rt. Hn. Glenvil (Colne Valley)
Pargiter, G. A.
TELLERS FOR THE AYES:




Mr. Pearson and Mr. Simmons.




NOES


Agnew, Cmdr. P. G.
Biggs-Davison, J. A.
Channon, H.


Alport, C. J. M.
Birch, Rt. Hon. Nigel
Clarke, Brig. Terence (Portsmth, W.)


Amery, Julian (Preston, N.)
Bishop, F. P.
Cole, Norman


Anstruther-Gray, Major Sir William
Black, C. W.
Cooper, Sqn. Ldr. Albert


Arbuthnot, John
Body, R. F.
Cooper-Key, E. M.


Armstrong, C. W.
Bossom, Sir A. C.
Cordeaux, Lt.-Col. J. K.


Ashton, H.
Boyle, Sir Edward
Corfield, Capt. F. V.


Atkins, H. E.
Braine, B. R.
Craddock, Beresford (Spelthorne)


Baldwin, A. E.
Brooke, Rt. Hon. Henry
Crouch, R. F.


Barlow, Sir John
Brooman-White, R. C.
Crowder, Sir John (Finchley)


Barter, John
Bullus, Wing Commander E. E.
Cunningham, Knox


Bell, Philip (Bolton, E.)
Butcher, Sir Herbert
Currie, G. B. H.


Bell, Ronald (Bucks, S.)
Campbell, Sir David
Dance, J. C. G.


Bennett, F. M. (Torquay)
Carr, Robert
D'Avigdor-Goldsmid, Sir Henry


Bevins, J. R. (Toxteth)
Cary, Sir Robert
Deedes, W. F.




Digby, Simon Wingfield
Keegan, D.
Powell, J. Enoch


Dodds-Parker, A. D.
Kerby, Capt. H. B.
Prior-Palmer, Brig. O. L.


Donaldson, Cmdr. C. E. McA.
Kerr, H. W.
Profumo, J. D.


Doughty, C. J. A.
Kershaw, J. A.
Raikes, Sir Victor


du Cann, E. D. L.
Kimball, M.
Ramsden, J. E.


Duncan, Capt. J. A. L,
Kirk, P. M.
Rawlinson, Peter


Eden, J. B. (Bournemouth, West)
Lagden, G. W.
Redmayne, M.


Elliot, Rt. Hon. W. E.
Lancaster, Col. C. G.
Rees-Davies, W. R.


Errington, Sir Eric
Langford-Holt, J. A.
Remnant, Hon. P.


Fell, A.
Leavey, J. A.
Renton, D. L. M.


Finlay, Graeme
Leburn, W. G.
Ridsdale, J. E.


Fisher, Nigel
Legge-Bourke, Maj. E. A. H.
Rippon, A. G. F.


Fleetwood-Hesketh, R. F.
Legh, Hon. Peter (Petersfield)
Roberts, Sir Peter (Heeley)


Foster, John
Lindsay, Hon. James (Devon, N.)
Robinson, Sir Roland (Blackpool, S.)


Freeth, D. K.
Lindsay, Martin (Solihull)
Roper, Sir Harold


Galbraith, Hon. T. G. D
Linstead, Sir H. N.
Russell, R. S.


Garner-Evans, E. H.
Lloyd, Maj. Sir Guy (Renfrew, E.)
Schofield, Lt.-Col. W.


Gibson-Watt, D.
Longden, Gilbert
Sharples, R. C.


Glover, D.
Low, Rt. Hon. A. R. W.
Simon, J. E. S. (Middlesbrough, W.)


Godber, J. B.
Lucas, Sir Jocelyn (Portsmouth, S.)
Smithers, Peter (Winchester)


Gomme-Duncan, Col. Sir Alan
Lucas, P. B. (Brentford &amp; Chiswick)
Smyth, Brig. Sir John (Norwood)


Gower, H. R.
Lucas-Tooth, Sir Hugh
Soames, Capt. C.


Graham, Sir Fergus
McAdden, S. J.
Spearman, Sir Alexander


Grant-Ferris, Wg Cdr. R. (Nantwich)
Macdonald, Sir Peter
Speir, R. M.


Green, A.
Mackie, J. H. (Galloway)
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)


Gresham Cooke, R.
Maclay, Rt. Hon. John
Stevens, Geoffrey


Grimston, Sir Robert (Westbury)
Maclean, Fitzroy (Lancaster)
Steward, Harold (Stockport, S.)


Grosvenor, Lt.-Col. R. G.
Macmillan, Rt. Hn. Harold (Bromley)
Steward, Sir William (Woolwich, W.)


Gurden, Harold
Macpherson, Niall (Dumfries)
Stoddart-Scott, Col. M.


Hall, John (Wycombe)
Maddan, Martin
Studholme, Sir Henry


Harris, Frederic (Croydon, N.W.)
Maitland, Hon. Patrick (Lanark)
Summers, Sir Spencer


Harris, Reader (Heston)
Manningham-Buller, Rt. Hn. Sir R.
Taylor, Sir Charles (Eastbourne)


Harrison, Col. J. H. (Eye)
Marlowe, A. A. H.
Teeling, W.


Harvey, Air Cdre. A. V. (Macolesfd)
Marples, A. E.
Thomas, Leslie (Canterbury)


Harvey, Ian (Harrow, E.)
Marshall, Douglas
Thomas, P. J. M. (Conway)


Harvey, John (Walthamstow, E.)
Mathew, R.
Thompson, Lt.-Cdr.R.(Croydon, S.)


Hay, John
Maudling, Rt. Hon. R.
Thornton-Kemsley, C. N.


Heald, Rt. Hon. Sir Lionel
Maydon, Lt.-Comdr. S. L. C.
Tiley, A. (Bradford, W.)


Heath, Rt. Hon. E. R. G.
Medlicott, Sir Frank
Tilney, John (Wavertree)


Hicks-Beach, Maj. W. W.
Milligan, Rt. Hon. W. R.
Touche, Sir Gordon


Hill, Mrs. E. (Wythenshawe)
Moore, Sir Thomas
Turner, H. F. L.


Hill, John (S. Norfolk)
Morrison, John (Salisbury)
Turton, Rt. Hon. R. H.


Hinchingbrooke, Viscount
Mott-Radclyffe, C. E.
Vane, W. M. F.


Holland-Martin, C. J.
Nabarro, G. D. N.
Vaughan-Morgan, J. K.


Holt, A. F.
Nairn, D. L. S.
Vickers, Miss J. H.


Hope, Lord John
Neave, Airey
Wakefield, Edward (Derbyshire, W.)


Horobin, Sir Ian
Nicholson, Godfrey (Farnham)
Wall, Major Patrick


Horsbrugh, Rt. Hon. Dame Florence
Nicolson, N. (B'n'm'h, E. &amp; Chr'ch)
Ward, Hon. George (Worcester)


Howard, John (Test)
Nield, Basil (Chester)
Ward, Dame Irene (Tynemouth)


Hughes-Young, M. H. C.
Noble, Comdr. A. H. P.
Waterhouse, Capt. Rt. Hon. C.


Hulbert, Sir Norman
Nutting, Rt. Hon. Anthony
Webbe, Sir H.


Hutchison, Sir Ian Clark (E'b'gh, W.)
Oakshott, H. D.
Whitelaw, W. S. I.(Penrith &amp; Border)


Hylton-Foster, Sir H. B. H.
O'Neill, Hn. Phelim (Co. Anrim, N.)
Williams, Paul (Sunderland, S.)


Iremonger, T. L.
Ormsby-Gore, Hon. W. D.
Williams, R. Dudley (Exeter)



Orr-Ewing, Charles Ian (Hendon, N.)
Wills, G. (Bridgwater)


Irvine, Bryant Godman (Rye)
Osborne, C.
Wilson, Geoffrey (Truro)


Jenkins, Robert (Dulwich)
Page, R. G.
Wood, Hon. R.


Jennings, J. C. (Burton)
Pannell, N. A. (Kirkdale)
Woollam, John Victor


Johnson, Dr. Donald (Carlisle)
Partridge, E.
Yates, William (The Wrekin)


Johnson, Eric (Blackley)
Pickthorn, K. W. M.



Jones, Rt. Hon. Aubrey (Hall Green)
Pilkington, Capt. R. A.



Joseph, Sir Keith
Pitt, Miss E. M.
TELLERS FOR THE NOES:


Joynson-Hicks, Hon. Sir Lancelot
Pott, H. P.
Mr. Bryan and Mr. Barber.

Mr. F. Beswick: I beg to move, in page 8, line 29, at the end to insert:
Provided that, where by virtue of this subsection the amount of surtax payable by an individual would exceed the sum of


(a) the amount of surtax which would have been payable by that individual, if this subsection had not been passed, and
(b) the amount of relief, if any, to which that individual is entitled by virtue of the foregoing subsection,


that excess shall be disregarded for all the purposes of the Income Tax Acts.
(3) The two foregoing subsections shall apply in respect of dividends on shares of or interest on deposits with a society registered

under the Industrial and Provident Societies Acts, 1893 to 1954, as they apply in respect of interest on deposits with the Post Office savings bank.
The purpose of the Amendment is simple, straightforward and sensible. It is to bring all small savings invested in societies registered under the Industrial and Provident Societies Acts into line with the other small savings already mentioned in the Bill and treat them the same in relation to taxation.
I will not argue on any technical point. I want to take the matter on a broader principle than the arguments deployed about the Birmingham Municipal Bank.


If one area of small savings is to be exempt from tax, we believe that all other similar small savings should also be exempt.
The Amendment is a limited one. It is designed to prevent discrimination against the Co-operative movement. Although I am especially concerned with the co-operative societies, because I believe they nave an exceptionally strong case here, I want to make it clear that my right hon. and hon. Friends associated with the Amendment would be only too pleased if the Government could grant exemption of tax to all small savings. We are not arguing in favour of the cooperative societies alone. During the debate we have already had, and on the Second Reading, it has been said that the justification for limiting this concession to the Post Office and trustee savings banks was that these deposits had a return limited by Statute and that the sums invested went directly to the Government. I want, first of all, to deal with the point about limitation of interest.
It is quite true that the shareholdings and the deposits to which I make reference are not limited by Statute to any fixed sums—not to 24 per cent. Nevertheless, in practice, by tradition and, indeed, by the rules in the main agreed by the Registrar of Friendly Societies, the cooperative societies limit their interest rates, and the average now paid is in fact about 3 per cent. Speculation and usury—high interest rates—are completely alien to co-operative principles.
The whole purpose of the Co-operative organisation is to ensure that the benefits of hard and useful work should be enjoyed by the consumer. We have always maintained that while fair and good rewards and maximum rewards should go to the consumer and to labour, the rewards to capital should be limited to a reasonable, moderate and fixed amount, so there is no reason, under the arguments advanced by the Economic Secretary and the Financial Secretary on the Second Reading of the Finance Bill, why tax concessions on deposits attracting 2½ per cent. in the Post Office Savings Bank should not also be extended to the deposits with the retail societies of the Co-operative movement or to their penny banks which earn a modest return of 2½ per cent. to 3 per cent., or possibly 3½ per cent.
I add this—I think that it is a relevant point—that although the interest yield is not limited or fixed by Statute the fact is that the amount of deposits is limited by Act of Parliament to £500 in the case of shareholdings or £50 in the case of penny banks, so it is not possible for these societies to go out and attract unlimited capital simply by stepping up interest rates.
I come to the second point which has been advanced earlier this afternoon, that in the case of Post Office Savings Bank or the special branches of the trustee savings banks the money goes directly to the Government. I was much surprised by the emphasis put on the virtue of small savings going directly to the Government because, hitherto, the whole of the arguments put forward from the Treasury Bench have been in favour of small savings as such. We have wanted to encourage the small saver. Although I appreciate what has been said about the money accumulated by the Post Office Savings Bank being in some way a funding operation, nevertheless, I should have thought that the Chancellor's main concern was to damp down immediate consumption and to encourage small savings of all kinds. That, I would have thought, would have been a help in his campaign against inflation. His intention, therefore, must be—and he has stated this on several occasions—to encourage all small savers.
If that is so, I would have thought that the 1d. or the £1 handed over the counter to a retail co-operative society, or to the co-operative penny banks, was just as valuable in the fight against inflation as money paid over the counter into the Post Office, or trustee savings banks. Moreover, it is a fact, as my hon. Friend the Member for Bristol, North-East (Mr. Coldrick) mentioned in the speech on Second Reading, which I hope the Chancellor has taken into account, that, although money is deposited with co-operative societies, or with the penny banks, a great proportion of it goes to the Government. In fact at present about £130 million of the £290 million invested through the Co-operative movement is re-invested in Government securities. Some sort of offer has been made by the Economic Secretary that if arrangements are made by the co-operative societies to make over to the Government the whole of the small savings invested with them to


be invested in Government securities, he is prepared to exempt shareholders of the co-operative societies from taxation on the first £15 of interest.
Really, I was surprised at the Economic Secretary mentioning this proposal on another Amendment, but I was even more surprised that he was able to put that over as a serious proposition. He must have known that it was quite irrelevant to the problem of the co-operative societies. He must have known that it would be impossible for money invested with a retail society to be made over en bloc to the Government in the shape of investment in Government securities. It is quite impossible to accept a proposition of that kind.
I do not want to put it too strongly, but I feel that the offer was almost an insult to those of my hon. and right hon. Friends who had put down the Amendment. Administratively, it would be quite unworkable to get the one thousand different organisations, working independently, to agree to such a proposal. But even if they could speak together it would be unacceptable. One cannot take money already used in the day to day business of a society, disregarding its economic or trading position, and put it immediately into Government securities. As an administrative proposal that is absolutely unworkable. I am surprised that it was put forward in any serious way by a Government spokesman.
We ask the Chancellor to consider again extending the concession to cover the co-operative retail societies or all societies registered under the Industrial and Provident Societies Acts. It is absolutely unthinkable even to start considering the kind of proposal that was made. I still ask the Chancellor to remember that this movement is probably the biggest single recruiting agent of small savings for the Government and that unless he accepts something of the spirit of the Amendment he will be giving it a slap in the eye for the pains it has taken to accumulate Government savings.
So far, I have spoken of the effect of the Clause, as it stands, upon the Co-operative movement. As a matter of fact, the effect will be made all the more serious because the Economic Secretary has now announced some concessions to

a certain municipal bank. The fact that the concession has been widened slightly will, quite obviously, be more hurtful to those organisations which have not been included in the concessions.
The Clause will hurt the Co-operative movement, and I suggest that in hurting it it will also hurt the country. The fact is that the proposed limited concession is an expedient. It is in line with the long history of wretched expedients that we have had from the Government. They have advanced from one expedient to another along a broadening path of increasing economic difficulties. It is possible that this limited concession, now extended slightly, will result in an apparent temporary increase in savings.
9.0 p.m.
In this respect the present concession is in line with the proposal for premium bonds. It may well appear to he attracting more small savings, and they may gain an immediate temporary improvement, but only at the price of eventual permanent damage, because these proposals will not build up a bigger amount of genuine small savings. I do not wish to dwell upon this point overmuch, but I am sure that the Committee was impressed by the figures given by my hon. Friend the Member for Stechford (Mr. Roy Jenkins) about the moneys withdrawn by the Birmingham Municipal Bank, and the Economic Secretary admitted that this was a serious matter.
If there have been withdrawals in that case, it is quite clear that those responsible for the direction of the Co-operative movement must be extremely anxious about the possibility of a transfer of funds from their societies, from the taxed area to the tax-free area described in the Bill. That can be of no advantage to anyone, and it can be to the serious disadvantage of the Co-operative movement. I would ask the Financial Secretary whether he contemplates with any degree of satisfaction the possibility of a serious transfer of funds from an organisation of the standing of the Co-operative movement.
For some possible illusory advance in one form of savings the Chancellor is risking damage to one of our oldest and finest thrift institutions, and I beg him earnestly to consider the deeper implications of what he is doing. Wittingly or


otherwise, he is discouraging an institution which is now world-wide in its growth, although born in this country, and whose values and principles are now bound up with the whole pattern of our social life.
Significantly, this Government and its predecessors—the previous post-war Labour Governments—have recognised the part which co-operation can play in developing a working democracy in the Colonies. Many hon. Members will have seen how co-operative credit organisations and trading societies are enabling Africans and Asians to develop the possibilities of thrift, self-reliance, tolerance and collective effort for the common good. Recently, in Malaya, I was deeply impressed by the way in which co-operative credit societies were helping the natives to get out of the grip of the moneylenders.
In the Colonies we are helping to develop new democracies and laying the foundations of a new form of society; we are helping to build up life there upon certain acceptable principles, and are using the co-operative idea as an instrument to that end. We are officially using and encouraging the co-operative idea as part of the democratic pattern of society there, but in this country we are now officially discouraging co-operation. It is possible that this is one of those little symptoms of a more serious decline, and that this kind of effort to gain some temporary advantage by the sacrifice of principles is one of the reasons why more and more people are talking about a democracy in decline, under Toryism.
I do not believe that the Chancellor wishes to buy a temporary short-term advantage at the expense of a long-term injury to one of our established social institutions, but the Government are building up a record of discrimination against the Co-operative movement. They have already refused to put small savings in co-operative banks upon the same footing as other savings when calculating benefits for old-age pensioners in their applications for supplementary benefits. We have recently had the example of Clause 20 of the Restrictive Trade Practices Bill and we now have this additional discrimination.
The offer made to us so far is a derisory one. The Chancellor must know that it is quite unacceptable. The fact that it is acceptable to a limited number of other institutions only makes the co-operative case stronger, and will worsen its position if this goes through. I warn the Chancellor that he is rousing the hostility of the Co-operative movement in this country by his continued discrimination. At the Whitsun Congress, where representatives of 12 million individual members gathered, a decidedly hostile resolution was passed. It is in the name of those 12 million members, as well as in the name of hon. Members on this side of the Committee, that I have pleasure in moving this Amendment which I hope the right hon. Gentleman will consider with much more sympathy than he has hitherto displayed.

Mr. Coldrick: I wish to support the Amendment. Although during the debate on Second Reading I endeavoured to the best of my ability to make plain the case for the Co-operative movement, obviously my efforts were ineffective, and therefore I welcome this opportunity to reinforce the arguments adduced on that occasion.
We are all generally agreed about the desirability of saving, and the Chancellor prides himself that one of the purposes of his Budget is to provide an incentive to save. But I think hon. Members will agree that first we must decide whether we are interested in saving or in particular savings. It seems to me that although the Chancellor is paying lip-service to savings in general, in practice he is discriminating and confining the incentive to savings in the Post Office and trustee savings banks. I have already made it clear, and there will be no misapprehension, that as one connected with a trustee savings bank I welcome any encouragement which the right hon. Gentleman gives in that direction. But I submit that the Chancellor is ignoring the recommendations of the Royal Commission by his present policy. If the right hon. Gentleman takes the trouble to read the Commission's Report, he will find this relevant paragraph:
We do not see our problem therefore as that of deciding whether there should be any relief for personal saving if there cannot be relief for all such saving. It seems to us rather that we should consider how far the present reliefs are justified as a departure from a general equitable principle. At any rate we


can take as our starting point the view that the tax system, if it does give relief for saving, should aim at securing that whatever reliefs are given should be carefully controlled, so as to avoid the risk of relief for what is really delusive saving, and should be available to as wide a range of taxpayers as possible, so as to minimise unfairness in the distribution of the benefit of the relief.
It is clear that the Commission was bitterly opposed to any discrimination. I submit that in the context of the economic difficulties confronting us at present, and as my hon. Friend the Member for Uxbridge (Mr. Beswick) pointed out, if we want to fight inflation, all savings should be welcomed for the purpose. It seems to me a matter of indifference as to the form of saving. If savings in other institutions are effected outside the Post Office and trustee savings banks, they must be put to some useful purpose. Whereas those particular savings may benefit the Treasury, one recognises that in the long run they are of no greater advantage to the nation than savings in general. Consequently, regarded from the point of view of the Co-operative movement, we must recognise that this is calculated to effect the transfer of savings from co-operative societies to Post Office and trustee savings banks, and consequently to create the impression of savings when, to use the term of the Royal Commission, they are delusory.
It is true, of course, that the Economic Secretary has said that he is prepared to make a concession with regard to the municipal bank. It is abundantly clear to him and to everybody who knows the co-operative societies that, although we talk about a Co-operative movement, that movement is made up of a thousand separate autonomous societies, and lest some hon. Members opposite may be under a misapprehension, let me make it abundantly clear that some of the small societies are not much larger than the corner shop that so endears itself to so many. Consequently, the amount of capital which such a society has at its disposal cannot possibly be placed under the direction of some outside body.
As my hon. Friend the Member for Uxbridge pointed out, in practice the management of even the smallest society knows perfectly well that the capital entrusted to it in the form of shares cannot possibly be engaged entirely in trade because the people in the locality look upon the local society as their savings bank.

As a result, at least 80 per cent. of the share deposits in local and large societies must be retained in a fairly liquid form in order to meet the immediate needs of people who may be suffering some financial difficulty.
In order to meet such requirements, the co-operative societies do, in practice, precisely what the trustee savings banks and the Post Office Savings Bank do. They proceed to put the major portion of the 80 per cent. which cannot be reinvested in industry either in Government or in local government securities. Therefore, in practice, the net result is almost identical with what we experience in the Post Office Savings Bank and the trustee savings banks. For that reason, it seems to me that if the Chancellor does not wish to render a very distinct disservice to 11 or 12 million small savers in the country, he should accept the Amendment.
If we look at the equity of the matter, I submit that it is literally indefensible that any one of us who can afford, together with his wife, to put £1,200 into the Post Office Savings Bank or into the trustee savings banks, thereby securing interest amounting to £30, should have that interest exempted from tax whereas the small person who has only £20 or, for that matter, only £1 in the co-operative society should have to pay tax on the limited interest which he receives. There is no justice or equity in that discrimination, and I submit that it is contrary to all the canons of taxation in this country for that method to be employed.
In the context of present circumstances, it is interesting to compare the attitude now being adopted towards savings with the theories preached in pre-war days. When I listened to the hon. Member for Louth (Mr. Osborne) earlier this afternoon, I felt that he had a nostalgic delight in trying to create a world which we hoped had perished for ever. In those days, we in this country believed sincerely in the teachings of the economist J. B. Hobson and in the theory of underproduction.
Owing to the inequalities in income, the assumption was, of course, that no matter how prodigal the rich might be they could not spend the whole of their income and that, consequently, a large part of it was being saved and put into capital investment. The result was that


we were producing far more goods than could be consumed and so had unemployment and poverty in the midst of plenty.
9.15 p.m.
There is this justification for Hobson, that in consequence of the policy of a Labour Government, even though wealth is not evenly distributed, incomes are more evenly distributed today than at any time in this country's history. Consequently, instead of making it possible for only the extremely wealthy to provide all the capital necessary to develop this country and the Commonwealth and to do all the things necessary not only to fight inflation but to guarantee prosperity in the future, it is imperative that savings shall be encouraged in all quarters.
It is for that reason that I beg of the Chancellor that, while encouraging those forms of savings which he has already indicated, he should be generous enough to include the Co-operative movement by granting the same concession to those savers as he is prepared to grant to those depositing with the Post Office Savings Bank and the trustee savings banks.

Sir Frederick Messer: As very little remains to be said after the two excellent speeches we have heard, I shall concentrate on only one aspect of principle. Those who know the Cooperative movement realise that it is not just a trading concern but is regarded by large numbers of members as being their own savings bank. Reference has been made to shares, but the shares in this connection bear no relationship to the world of stockbrokers. What happens is that a working man or woman takes one share in the local co-operative society. That is not done in order to use that share as a commodity which can be sold at a time when shares rise. As shareholders, members benefit from whatever dividend there is and it is a limited dividend.
Whilst it is true that the shares are not available for sale, the holder can at any time, without any notice beyond the necessity of writing for it, withdraw his share capital and, as has already been said, that capital is limited. It means, therefore, that large number of members of co-operative societies look upon this as an opportunity for savings. Many would never be able to go on a holiday were it not for the fact that during the

year they were able to add their dividend to their shareholding and then draw it out when they wished to do so.
I can conceive of nothing more worthy of encouragement than this peculiar, particular and very valuable form of thrift amongst the workers. I realise that it occupies a place different from that taken by the Post Office Savings Bank and the trustee savings banks. We have to remember that the co-operative societies, as banking institutions, are peculiar institutions. The Co-operative movement has its banking side, but what is happening in effect is that the consumer is receiving back the difference between the cost of the commodities and what he pays for them. There is no profit. Nobody gets any profit out of it at all.
I want to raise the question of equity here. Why should a man who puts his money in the Post Office Savings Bank, for instance, be exempt from Income Tax on the first £15 of interest, whereas he puts it into his own bank, the co-operative society, he is denied that exemption? Not merely is it unfair, but in the end it is going to be harmful because the attraction of getting that remission of tax will mean greater difficulty on the part of the Co-operative movement in getting that shareholding that is necessary to run its business.
For these and many other reasons which could be advanced, but on which I feel it would be unfair to dwell as there are so many others who want to speak, I appeal to the Treasury to reconsider this matter in the interests not only of the Co-operative movement and its members but of the country itself.

Mr. Rankin: I should imagine that the Financial Secretary has now abandoned the suggestion which he made a little earlier when we were discussing the municipal banks. From what he has heard already, I think he realises that the effect of his proposal would be disastrous on the trading side of the Co-operative movement, and because of that, as my hon. Friends have already made clear, the offer which he made cannot be entertained.
Earlier in today's proceedings we discussed an Amendment moved by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), who is no longer in his place, supported by a large


body of argument from the Government benches. The purpose of that Amendment was to raise the level at which Surtax becomes operative from £2,000 to £3,000. We were dealing then with the large income groups. It was maintained by the Government supporters that unless the noble Lord's Amendment were accepted, we should not provide incentive to those groups. and would be creating injustice. I think it is only fair to say that in certain of its aspects the argument which was advanced had a good measure of support on these benches.
It is just that argument which we are advancing now. We hope that when we are dealing with the lower income groups—and it is mostly people in the lower income groups who belong to the Co-operative movement—the Government supporters will show as much concern for them as they showed for the larger income groups earlier in the evening. The argument of injustice applies here. I do not think it will be denied that there is injustice when a person who is holding, as most co-operative members hold on the average, about £20 in co-operative savings, is penalised by having his interest taxed; when at the same time the person who is holding perhaps £600 in the Post Office or a trustee savings bank receives his interest completely tax free. I think that will generally be recognised as a wrong which I hope hon. Members opposite will support us in terminating tonight. They received some support for their argument from this side of the Committee, and I hope that they will now give a measure of support to arguments of a similar nature which come now from this side of the Committee, on behalf of a lower income group.
The other point, apart from the one of injustice, is that of incentives. No one will deny—and it has been made clear by previous speakers—that the Co-operative movement is not merely a trading movement but is also a great thrift organisation. One could spend a long time detailing to hon. Members what the thrift aspect of the Co-operative movement has meant in helping to build the life of this country, in providing careers for boys and girls in working class homes, and, in some cases perhaps, in helping to send one or two Members to the House of Commons.
The incentive which derives from the trading side of the Co-operative movement cannot be denied. I feel that the Government, in the proposals which they are putting forward tonight, will destroy this incentive towards trading with the Co-operative movement which is provided by the dividend. That dividend, when it becomes savings, as it inevitably does, is a very important matter. Since the war, about £400 million have been paid out to members of the Co-operative movement in dividend. A large amount of that, almost half of it, I think, has gone into savings, and a great deal of those savings have, in turn, gone into Government securities. This is what the Government are asking us to do—to save—and yet they tell us tonight that if we do so, they will inflict a discriminatory tax upon those savings which are co-operative.
However they may ultimately decide to lodge their votes, I am sure that all hon. Members of this Committee will feel in their hearts that to punish, by discriminating against such savings, particularly working class savings, as the Chancellor wishes to do, is something that ought not to be tolerated. All I am asking now is that hon. Members opposite will accept the arguments which they advanced earlier in favour of providing incentives for the higher income groups, when we now want to provide similar incentives for the lower income groups. I ask them, accepting those same arguments, to support us in putting a stop to the injustices which we are concerned, by this Amendment, to prevent. Since they accepted those arguments earlier on behalf of one section of the community, I hope that they will now accept them for the other section of the community, and support us in the Lobby.

Mr. Sydney Irving: I should like to say from this side of the Committee that we are very happy that our Birmingham friends have been able to secure some accommodation from the Chancellor. We certainly do not begrudge them that.
Notwithstanding that concession which has been made, we must say at the outset that the limit which has been set upon the Chancellor's concession throughout is an arbitrary one, and one which is completely out of harmony with the spirit of his Budget, which has been for the encouragement of small savings.
9.30 p.m.
For some hundred years the Co-operative movement has been one of the main instruments in the encouragement of working-class savings. Although we have a Chancellor of the Exchequer who has two main aims, one to cut the cost of living and the other to increase small savings, not only does he not give any encouragement to the Co-operative movement in its task of encouraging savings, but he has made an unjust and discriminatory attack upon the Co-operative movement.
Only last week, the Chancellor himself was asking the workers to help maintain a plateau of stability. What confidence does he think the workers can have in him or his Government when in the recent past they have made two definite and hostile attacks on the Co-operative movement, first concerning restrictive trade practices, and now, by the refusal of this concession, in discriminating against the Co-operative movement?
Several of my hon. Friends have shown how socially valuable is the work of the Co-operative movement in this connection. I want to bring my example a little nearer home. There is in my constituency a society, the Dartford Industrial Co-operative Society—quite a small one in relation to many of the thousand societies in the country—with 25,000 members and a capital of £750,000. In that one society, approximately 55 per cent. of the members habitually leave in their dividend after the half-yearly distribution. This constitutes 45 per cent. of the total dividend declared by the society and is a considerable contribution to the small savings of the country.
It is a progressive and efficient society and in the recent past it has done a great deal of development. Nevertheless, of its £750,000 capital it is still able to set aside 35 per cent., or approximately £250,000, to invest in Government and local authority funds. That society, like many others, is desperately afraid that this discrimination against the Co-operative movement will mean that some of the funds which have been carefully built up in this and other societies will be transferred to other organisations so that depositors will be able to get the concession.
That fear is very real and has already been justified in other directions, particularly concerning the discrimination against the Co-operative movement in supplementary benefits when the first £375, although it may be ignored in the Post Office, is taken into account as far as Co-operative societies are concerned. We feel that the transference which took place on that occasion may again take place as a result of the denial of this concession to the co-operative societies.
The work of the co-operative societies is valuable to the small savings movement, and it is totally unjust and inequitable that when a depositor has £15 of interest accruing in a co-operative society, he should be refused this concession while it is possible to obtain the concession on a holding of up to £600 in Government savings. I therefore ask the Chancellor to reconsider this matter, not to arouse the hostility of the 12 million consumers who represent the Co-operative movement, and to accept the Amendment.

Mr. Arthur Palmer: It will have been noticed that the emphasis of most of us in the Committee this evening is on the subject of savings, but the interesting thing is that the emphasis of Government spokesmen is simply on State saving. I should have thought that the real problem now facing the country in the matter of savings was to attract and interest the small wage and salary earner, especially in these days of full employment, the Welfare State and social security.
The larger saver, whether an individual or an institution, looks upon saving in a practical, business way, according to the yield it will bring, and the larger saver needs no conversion to the principle of saving. He calls it investment, and treats it with the same respect he does the other institutions of life and morality. It seems to me that the small saver is different, because for him saving means going without, going without some comfort, amenity, or necessity which is due to him and his family, and saving for him involves sacrifice and, on occasion, even family disagreements, accusations of meanness, and so on. I hope that the Economic Secretary will appreciate this point. Hence small saving, to succeed in these circumstances, must appeal to


the imagination, and probably to the emotions also, because the purely materialistic argument tends to be all against it.
The great power of the Co-operative movement is that it links savings with other sanctions, with the interest and opportunity afforded by a social movement in which the saver can himself play an active part to secure success. I know that there are hon. and right hon. Members on the other side of the Committee who dislike this social interpretation of the Co-operative movement because it finds its reflection in political principles and policies. They look on the co-operative stores as a kind of poor man's Harrods or the poor man's Fortnum and Mason, but the Co-operative movement—I emphasise this briefly, because I know that we are anxious to proceed to a Division on this matter—is a successful agent in promoting thrift exactly because it adds to self-interest the deeper interest of democratic association for a group purpose which is seen to be good.
I suggest to the Economic Secretary that he should seriously take that into consideration, if he sincerely believes in saving. This is supposed to be a savings Budget. I should think it the strangest of all strange arguments coming from a Conservative Government if he were to argue that the only saving good for the country is State saving. I should have thought that the Co-operative movement could and should have been regarded as a great collector of savings, particularly of working-class savings, and worthy of the consideration this Amendment, if agreed to, would give it.

Sir E. Boyle: We have heard a number of distinguished speeches from the other side of the Committee, and I can assure the Committee that my right hon. Friend will pay careful attention to what has been said. I should like immediately to take up one thing which the hon. Member for Cleveland (Mr. Palmer) said. My right hon. Friend certainly does not say that saving is of no value unless the money is lent to the State.
However, that is not quite what is at issue here. The point is that this tax relief should be limited to money invested in the Post Office Savings Bank and the ordinary departments of the trustee savings banks because that money is lent to the State. As I will explain,

the cost of what is proposed would be very considerable, and it is for that reason that this Amendment could not be acceptable. If the Government were to agree to admit the dividends on shares of co-operative societies it would be impossible to stop there. It would be impossible to exclude building societies. My hon. Friend the Member for Wimbledon (Mr. Black) knows a good deal about that.
They would have a strong plea to the included. It would be very difficult to leave out the joint stock banks as well, and it might very well be, if we included the building societies and co-operative societies, according to the best estimate I can give the Committee, that the cost of the concession would be very considerably above £10 million in a full year, and might very well be something like £40 million. That is a measure of what we are discussing.
I tried to explain when we were debating an earlier Amendment exactly why Clause 8 has had to be drawn in a fairly narrow way. We are discussing here a defimte tax concession by my right hon. Friend to encourage saving, and my right hon. Friend thinks that this concession must be limited to those savings where the money is not only saved but lent to the State and effectively frozen. After all, the whole point of saving is precisely that we should be able to finance the necessary investments in the community without inflation, and the whole point of this proposal for this tax relief is precisely in the form that my right hon. Friend should be able to make his Budget surplus larger still. If we made all these concessions, the cost would be very much greater and would defeat my right hon. Friend's purpose. I have listened to the arguments and they will be considered, but I ask the Committee to reject the Amendment.

Mr. Beswick: If the hon. Gentleman is saying that the reason for limiting the concessions is the question of cost, what will be the position if there is a diversion of saving from one institution to another in order to save tax? Will not the cost be the same in the long run?

Sir E. Boyle: That is a hypothetical question which I cannot answer. I adhere to the argument that there is a limit to what we can allow the concession to cost this year.

Mr. H. Wilson: The Economic Secretary's speech is not only extremely disappointing in view of the request made to the Government by my hon. Friends, but it disposes finally of any lingering suspicion there might have been that this is a savings Budget. It is clear that the Budget, with the one exception of the Millard Tucker proposals which may bring forward some increased savings, is not designed—or if it is designed it fails in its purpose—to achieve an increase in savings, especially small savings. On the arguments presented by the Economic Secretary, the Budget will not bring forward more savings but will merely divert them from one place to another, not necessarily in the most helpful manner. A number of my hon. Friends have produced very strong arguments to show that one of the sources of diversion will be the extremely important areas represented by the Cooperative movement.
There is a very great difference between the Amendment which we are now debating and the one debated earlier, relating to municipal banks. We are not talking here about savings banks but about capital which is urgently required to finance the essential work of distribution. The Committee will have noted the restraint which my hon. Friends have shown in debating the Amendment. Not only was it clear that at least twenty or thirty of my hon. Friends wanted to speak, but those who spoke rationed themselves very severely in the matter of time. I have heard my hon. Friend the Member for Uxbridge (Mr. Beswick) expatiate on this subject, and he is worth two hours at any time, and I should not like to tell the Committee of the potentialities of others of my hon. Friends who have not risen at all.

Mr. Rankin: There was a bigger restraint on the other side of the Committee.

Mr. Wilson: It is very interesting that when this afternoon we debated the welfare of 219,000 Surtax payers, hon. Members opposite kept the debate going for two and a half hours, whereas this evening, in debating the interests of nearly 12 million co-operators, we on this side of the Committee have already dismissed the subject in less than an hour, with not a bark out of any hon. Member opposite.
9.45 p.m.
Therefore. I think that if the Government Front Bench required any proof of the extent to which we are faciliating the passage of this Bill, they have it in this Amendment. I put it to my hon. Friends that it is important for us to come fairly quickly to a decision on this Question, though I hope that none of them will go to bed tonight feeling frustrated, because they will have another opportunity when we debate the Question "That the Clause stand part of the Bill".
In the event of the Economic Secretary not being fully convinced of the strength of our arguments, I feel that he may have a better chance of being convinced by the eloquence of my hon. Friends after we have reached a decision on this Amendment. I hope that the hon. Gentleman will then report the fact of being convinced to the Chancellor, so that when we reach the Report stage, the necessary concession will be made.
What is the real issue here? The Chancellor has set out in this Budget to encourage savings, especially small savings. We on this side of the Committee are doubtful whether he can get any small savings, because the average family in this country has not very much margin out of which to save because of the present cost of living. We know that for millions of our families savings through the medium of the Co-operative movement are not only personally essential to them, but are essential to the economic well-being of the country.
In the dark years before the war the only saving made by most families in this country—I am probably right in saying the majority was by keeping in the co-operative society to which they belonged the dividends to which they were entitled in those cases where they could afford to leave them there. I put it to the hon. Gentleman that for over a century the banking of co-operative dividends has been one of the most important sources of saving in this country.
There are many people, especially in the northern and Midlands industrial distrists who today own their own houses, and probably vote Conservative, because their fathers or grandfathers had never drawn out their dividend over a period of twenty or thirty years. Indeed, the house next door to the one in which I


was born in Yorkshire was bought completely out of the banking of co-operative dividends.
That seems to amuse the Economic Secretary, but I can tell the hon. Gentleman that it is a fact. Does the hon. Gentleman wish to murmur something?

Mr. Dodds: Is my right hon. Friend aware that if one of the hon. Gentlemen opposite does speak, he will be the first one on the Conservative side to do so on this important matter?

Mr. Wilson: I am afraid that if any hon. Gentlemen opposite do so, they will speak with much less knowledge of the subject than when they were discussing Surtax earlier this evening.
Here we have the Government ostensibly encouraging saving, yet they provide no incentive for this important method of working-class saving, which surely the hon. Gentleman wants to encourage?

Sir E. Boyle: Yes.

Mr. Wilson: One understands that he does. [An HON. MEMBER: "Does he want it?"] The hon. Gentleman said that he did. Not only are the Government failing to provide an incentive to this important sector, but, what is more important, they are providing an incentive for draining savings away into the Post Office Savings Bank. Of course it is desirable to get all we can into the Post Office Savings Bank, but I put it to the hon. Gentleman, who is a distinguished economist, that that will only be of value to the extent that it represents net saving and not a diversion from other saving.
So far the hon. Gentleman has not grasped that point. He spent some time in saying how difficult it would be to give way on this Amendment because there would be discrimination against other forms of saving. Yet it was the hon. Gentleman himself who started the discrimination with Clause 8. It just shows what a tangled web he weaves when first he practises to discriminate in respect of a certain form of saving. Had the hon. Gentleman not done so in respect of the Post Office Savings Bank, had he taken our advice on that point, we should not have the difficulty which we face on this Amendment.
I do not think that the Economic Secretary will disagree that most of the experts who have examined the Chancellor's so-called "savings Budget" have said that it will mean only a diversion of savings and not a net increase. My hon. Friends have produced some very strong reasons for stating that one of the major diversions will be from co-operative societies. In this instance we are talking not about the co-operative bank but about the working capital of the co-operative societies.
I should have thought that the Economic Secretary could have given us a full reply. He gave us a very perfunctory reply, much more perfunctory than that on the subject of Surtax. It repays ill, not only the restraint that the Opposition have shown in enabling a decision to be reached at a reasonably early hour, but also the service which the Co-operative movement has given to the country in the matter of savings, not only since the war, but for a century.
I hope that the hon. Gentleman will tell us before we have to challenge him on the point that not only will he report our arguments to the Chancellor but that he can give us some real hope that the discrimination introduced by Clause 8 will be removed, and that he is prepared to accept the Amendment in principle. He may not like the wording of our Amendment. I appreciate that the Treasury draftsman, who is very ingenious, could devise a form of words to give us what we seek. We are not concerned about the form of words. What we want to do is to see an end put to the most damaging discrimination which is inherent in Clause 8. Unless the hon. Gentleman is willing to inform us that there will be an end to the discrimination, I am afraid that my hon. Friends and I—there are many more powerful arguments which we could have deployed—must vote against the Government in the Lobby.

Sir E. Boyle: I cannot add to what I have already said. I should like to point out that the reason why I did not deploy the argument at greater length was that I should have had considerably to cover the ground which I had already covered in reply to an earlier Amendment. Certainly it was not due to any lack of interest on my part in the Co-operative


movement or to any doubts about the sincerity of hon. Members opposite in the matter.

Mr. Wilson: I must inform the hon. Gentleman—I am convinced that for once he has not grasped the point; it is rarely that he does not do so—that if he thinks the argument in replying to this Amendment is the same as the reply to the Amendment about savings banks, he has not understood the arguments that have been put forward. It is not a question of a diversion from one form of bank to another. It is wrong and misleading to say that if he gave way here he would have to give way in respect of the joint stock banks and the rest. They are not on a par at all. This is a question, not of bank savings, but of working capital,

and one of the major forms of working-class savings.

We are very disappointed at the hon. Gentleman's reply. It is clear that he is in need of further economic education on this point, and I have a feeling that he will get it when we debate the Clause as a whole. As a result of the education that he will receive in that debate, I hope that we shall get a much fuller reply than the one given to this Amendment. I appeal to my hon. Friends to let us come to a decision, however strongly they may wish to speak. I appeal to them—not that an appeal is needed—to go into the Lobby against the Government on this Amendment.

Question put, That those words be there inserted:—

The Committee divided: Ayes 174, Noes 228.

Division No. 203.]
AYES
[9.54 p.m.


Ainsley, J. W.
Forman, J. C.
Messer, Sir F.


Albu, A. H.
Fraser, Thomas (Hamilton)
Mitchison, G. R.


Allen, Arthur (Bosworth)
Gaitskell, Rt. Hon. H. T. N.
Morris, Percy (Swansea, W.)


Allen, Scholefield (Crewe)
Gibson, C. W.
Mort, D. L.


Baird, J.
Gordon Walker, Rt. Hon. P. C.
Moyle, A.


Bellenger, Rt. Hon. F. J.
Grey, C. F.
Neal, Harold (Bolsover)


Benn, Hn. Wedgwood (Bristol, S.E.)
Griffiths, Rt. Hon. James (Llanelly)
Noel-Baker, Francis (Swindon)


Benson, G.
Griffiths, William (Exchange)
O'Brien, Sir Thomas


Beswick, F.
Hale, Leslie
Oliver, G. H.


Blackburn, F.
Hall, Rt. Hn. Glenvil (Colne Valley)
Oram, A. E.


Blyton, W. R.
Hamilton, W. W.
Orbach, M.


Boardman, H.
Hannan, W.
Oswald, T.


Bottomley, Rt. Hon. A. G.
Hastings, S.
Owen, W. J.


Bowden, H. W. (Leicester, S.W.)
Hayman, F. H.
Paling, Rt. Hon. W. (Dearne Valley)


Boyd, T. C.
Healey, Denis
Paling, Will T. (Dewsbury)


Braddock, Mrs. Elizabeth
Henderson, Rt. Hn. A. (Rwly Regis)
Palmer, A. M. F.


Brookway, A. F.
Hobson, C. R.
Pargiter, G. A.


Broughton, Dr. A. D. D.
Holmes, Horace
Parker, J.


Burton, Miss F. E.
Howell, Charles (Perry Barr)
Parkin, B. T.


Butler, Herbert (Hackney, C.)
Hoy, J. H.
Paton, John


Butler, Mrs. Joyce (Wood Green)
Hubbard, T. F.
Price, J. T. (Westhoughton)


Castle, Mrs. B. A.
Hughes, Emrys (S. Ayrshire)
Probert, A. R.


Champion, A. J.
Hunter, A. E.
Proctor, W. T.


Chapman, W. D.
Hynd, H. (Accrington)
Pryde, D. J.


Chetwynd, G. R.
Irvine, A. J. (Edge Hill)
Randall, H. E.


Clunie, J.
Irving, S. (Dartford)
Rankin, John


Coldrick, W.
Isaacs, Rt. Hon. G. A.
Redhead, E. C.


Collick, P. H. (Birkenhead)
Janner, B.
Reeves, J.


Collins, V.J.(Shoreditch &amp; Finsbury)
Jay, Rt. Hon. D. P. T.
Reid, William


Corbet, Mrs. Freda
Jeger, George (Goole)
Roberts, Albert (Normanton)


Cove, W. G.
Jeger, Mrs.Lena(Holbn &amp; St.Pncs,S.)
Robinson, Kenneth (St. Pancras, N.)


Craddock, George (Bradford, S.)
Jones, David (The Hartlepools)
Rogers, George (Kensington, N.)


Cronin, J. D.
Jones, Jack (Rotherham)
Ross, William


Crossman, R. H. S.
Jones, J. Idwal (Wrexham)
Shinwell, Rt. Hon. E.


Cullen, Mrs. A.
Jones, T. W. (Merioneth)
Short, E. W.


Darling, George (Hillsborough)
Kenyon, C.
Shurmer, P. L. E.


Davies, Harold (Leek)
Key, Rt. Hon. C. W.
Silverman, Julius (Aston)


Davies, Stephen (Merthyr)
King, Dr. H. M.
Skeffington, A. M.


Deer, G.
Lawson, G. M.
Slater, Mrs. H. (Stoke, N.)


de Freitas, Geoffrey
Ledger, R. J.
Slater, J. (Sedgefield)


Delargy, H. J.
Lever, Leslie (Ardwick)
Sorensen, R. W.


Dodds, N. N.
Lewis, Arthur
Sparks, J. A.


Donnelly, D. L.
Lindgren, G. S.
Steele, T.


Dugdale, Rt. Hn. John (W. Brmwch)
Logan, D. G.
Stewart, Michael (Fulham)


Ede, Rt. Hon. J. C.
MacColl, J. E.
Stokes, Rt. Hon. R. R. (Ipswich)


Edwards, Rt. Hon. John (Brighouse)
McKay, John (Wallsend)
Stones, W. (Consett)


Edwards, Robert (Bilston)
McLeavy, Frank
Strachey, Rt. Hon. J.


Edwards, W. J. (Stepney)
Mahon, Simon
Summerskill, Rt. Hon. E.


Evans, Albert (Islington, S. W.)
Mallalieu, E. L. (Brigg)
Sylvester, G. O.


Fienburgh, W.
Mann, Mrs. Jean
Taylor, Bernard (Mansfield)


Fletcher, Eric
Mayhew, C. P.
Taylor, John (West Lothian)




Thomson, George (Dundee, E.)
Wells, William (Waisall, N.)
Wills, Eustace (Edinburgh, E.)


Tomney, F.
West, D. G.
Wilson, Rt. Hon. Harold (Huyton)


Turner-Samuels, M.
Wheeldon, W. E.
Woof, R. E.


Ungoeth-Thomas, Sir Lynn
White, Henry (Derbyshire, N.E.)
Yates, V. (Ladywood)


Viant, S. P.
Wilkins, W. A.
Younger, Rt. Hon. K.


Warbey, W. N.
Willey, Frederick



Weitzman, D.
Williams, W. R. (Openshaw)
TELLERS FOR THE AYES:


Wells, Percy (Faversham)
Williams, W. T. (Barons Court)
Mr. Pearson and Mr. Simmons.




NOES


Agnew, Cmdr. P. G.
Grosvenor, Lt.-Col. R. G.
Milligan, Rt. Hon. W. R.


Alport, C. J. M.
Gurden, Harold
Moore, Sir Thomas


Amery, Julian (Preston, N.)
Hall, John (Wy[...]ombe)
Mott-Radclyffe, C. E.


Arbuthnot, John
Harris, Frederic (Croydon, N. W.)
Nabarro, G. D. N.


Armstrong, C. W.
Harris, Reader (Heston)
Nairn, D. L. S.


Ashton, H.
Harrison, Col. J. H. (Eye)
Neave, Airey


Atkins, H. E.
Harvey, Air Cdre. A. V. (Maoolesfd)
Nicholson, Godfrey (Farnham)


Baldwin, A. E.
Harvey, Ian (Harrow, E.)
Nicolson, N. (B'n'm'th, E. &amp; Chr'ch)


Barber, Anthony
Harvey, John (Walthamstow, E.)
Nield, Basil (Chester)


Barlow, Sir John
Hay, John
Noble, Cmdr. A. H. P.


Barter, John
Heald, Rt. Hon. Sir Lionel
Nutting, Rt. Hon. Anthony


Bell, Philip (Bolton, E.)
Heath, Rt. Hon. E. R. G.
Oakshott, H. D.


Bell, Ronald (Bucks, S.)
Hicks-Beach, Maj. W. W.
O'Neill, Hn. Phelim (Co. Antrim, N.)


Bennett, F. M. (Torquay)
Hill, Mrs. E. (Wythenshawe)
Ormsby-Gore, Hon. W. D.


Bevins, J. R. (Toxteth)
Hill, John (S. Norfolk)
Orr-Ewing, Chares Ian (Hendon, N.)


Biggs-Davison, J. A.
Hinchingbrooke, Viscount
Osborne, C.


Birch, Rt. Hon. Nigel
Holland-Martin, C. J.
Page, R. G.


Bishop, F. P.
Holt, A. F.
Pannell, N. A. (Kirkdale)


Black, C. W.
Hope, Lord John
Partridge, E.


Body, R. F.
Hornsby-Smith, Miss M. P.
Pickthorn, K. W. M.


Boothby, Sir Robert
Horobin, Sir Ian
Pikington, Capt. R. A.


Bossom, Sir A. C.
Horsbrugh, Rt. Hon. Dame Florence
Pitt, Miss E. M.


Boyle, Sir Edward
Howard, John (Test)
Pott, H. P.


Braine, B. R.
Hughes-Young, M. H. C.
Powell, J. Enoch


Brooke, Rt. Hon. Henry
Hulbert, Sir Norman
Prior-Palmer, Brig. O. L.


Brooman-White. R. C.
Hutchison, Sir Ian Clark (E'b'gh,W.)
Profumo, J. D.


Bullus, Wirg Commander E. E.
Hyde, Montgomery
Raikes, Sir Victor


Butcher, Sir Herbert
Hylton-Foster, Sir H. B. H.
Ramsden, J. E.


Butler, Rt. Hn. R. A. (Saffron Waiden)
lremonger, T. L.
Rawlinson, Peter


Campbell, Sir David
Irvine, Bryant Godman (Rye)
Redmayne, M.


Carr, Robert
Jenkins, Robert (Dulwich)
Rees-Davies, W. R.


Cary, Sir Robert
Jennings, J. C. (Burton)
Remnant, Hon. P.


Channon, H.
Johnson, Dr. Donald (Carlisle)
Renton, D. L. M.


Clarke, Brig. Terence (Portsmth, W.)
Johnson, Eri[...] (Blackley)
Ridsdale, J. E.


Cole, Norman
Jones, Rt. Hon. Aubrey (Hall Green)
Rippon, A. G. F.


Cooper-Key, E. M.
Joseph, Sir Keith
Roberts, Sir Peter (Heeley)


Cordeaux, Lt.-Col. J. K.
Joynson-Hicks, Hon. Sir Lancelot
Robinson, Sir Ronald (Blackpool, S.)


Corfield, Capt. F. V.
Keegan, D.
Roper, Sir Harold


Craddock, Beresford (Spelthorne)
Kerby, Capt. H. B.
Russell, R. S.


Crouch, R. F.
Kerr, H. W.
Schofield, Lt.-Col. W.


Crowder, Sir John (Finchley)
Kimball, M.
Sharples, R. C.


Crowder, Petre (Ruislip—Northwood)
Kirk, P. M.
Simon, J. E. S. (Middlesbrough, W.)


Cunningham, Knox
Lagden, C. W.
Smithers, Peter (Winchester)


Currie, G. B. H.
Lancaster, Col. C. G.
Smyth, Brig. Sir John (Norwood)


Dance, J. C. G.
Langford-Holt, J. A.
Soames, Capt. C.


D'Avigdor-Goldsmid, Sir Henry
Leavey, J. A.
Spearman, Sir Alexander


Deedes, W. F.
Leburn, W. G.
Spelr, R. M.


Digby, Simon Wingfield
Legge-Bourke, Maj. E. A. H.
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)


Dodds-Parker, A. D.
Legh, Hon. Peter (Petersfield)
Stevens, Geoffrey


Donaldson, Cmdr. C. E. McA.
Lindsay, Hon. James (Devon, N.)
Steward, Harold (Stockport, S.)


Doughty, C. J. A.
Lindsay, Martin (Sollhull)
Steward, Sir William (Woolwich, W.)


du Cann, E. D. L.
Linstead, Sir H. N.
Stoddart-Scott, Col. M.


Duncan, Capt. J. A. L.
Lloyd, Maj. Sir Guy (Renfrew, E.)
Studholme, Sir Henry


Eden, J. B. (Bournemouth, West)
Longden, Gilbert
Summers, Sir Spencer


Elliot, Rt. Hon. W. E.
Low, Rt. Hon. A. R. W.
Taylor, Sir Charles (Eastbourne)


Errington, Sir Eric
Lucas, Sir Jocelyn (Portsmouth, S.)
Teeling, W.


Fell, A.
Lucas, P. B. (Brentford &amp; Chiswick)
Thomas, Leslie (Canterbury)


Finlay, Graeme
Lucas-Tooth, Sir Hugh
Thomas, P. J. M. (Conway)


Fisher, Nigel
McAdden, S. J.
Thompson, Lt.-Cdr.R.(Croydon, S.)


Fleetwood-Hesketh, R. F.
Macdonald, Sir Peter
Thornton-Kemsley, C. N.


Foster, John
Mackie, J. H. (Galloway)
Taney, John (Wavertree)


Freeth, D. K.
Maclay, Rt. Hon. John
Touche, Sir Gordon


Galbraith, Hon. T. G. D.
Maclean, Fitzroy (Lancaster)
Turner, H. F. L.


Garner-Evans, E. H.
Macmillan, Rt. Hn. Harold (Bromley)
Turton, Rt. Hon. R. H.


Gibson-Watt, D.
Macpherson, Niall (Dumfries)
Vane, W. M. F.


Glover, D.
Madden, Martin
Vaughan-Morgan, J. K.


Godber, J. B.
Maitland, Hon. Patrick (Lanark)
Vickers, Miss J. H.


Gomme-Duncan, Col. Sir Alan
Manningham-Buller Rt. Hn. Sir R.
Vosper, D. F.


Gower, H. R.
Marlowe, A. A. H.
Wall, Major Patrick


Graham, Sir Fergus
Marples, A. E.
Ward, Hon, George (Worcester)


Grant-Ferris, Wg Cdr. R. (Nantwich)
Marshall, Douglas
Ward, Dame Irene (Tynemouth).


Green, A.
Mathew, R.
Waterhouse, Capt. Rt. Hon. C.


Gresham Cooke, R.
Maudling, Rt. Hon. R.
Webbe, Sir H.


Grimston, Sir Robert (Westbury)
Maydon, Lt.-Comdr, S. L. C.
Whitelaw, W.S.I.(Penrith &amp; Border)







Williams, Paul (Sunderland, S.)
Wilson, Geoffrey (Truro)



Williams, R. Dudley (Exeter)
Woollam, John Victor
TELLERS FOR THE NOES:


Wills, G. (Bridgwater)
Yates, William (The Wrekin)
Nr. E. Wakefield and Mr. Bryan.

Dr. Horace King: I beg to move, in page 8, line 29, at the end to insert:
Provided that, where by virtue of this subsection the amount of surtax payable by an individual would exceed the sum of

(a) the amount of surtax which would have been payable by that individual, if this subsection had not been passed, and
(b) the amount of relief, if any, to which that individual is entitled by virtue of the foregoing subsection,

that excess shall be disregarded for all the purposes of the Income Tax Acts.
(3) The two foregoing subseotions shall apply in respect of interest on deposits with a society registered as a friendly society under the Friendly Societies Act, 1896, as they apply in respect of interest on deposits with the Post Office savings bank.
I like the Government's original proposition to exempt certain savings up to £15 a year from Income Tax. I think that that will help a lot of people who are just above the National Assistance level, but I cannot see why only the Post Office and the trustee savings bank savings should be considered. Surely the Chancellor does not argue that other savings will not help him in his economic problems.
The Amendment seks to extend the concession to friendly societies, and I want to say something about these societies, and especially about one that I know very well, the Teachers' Provident Society. First, let me give the Committee an idea of the size of the problem and of the sums of money involved. Let us be quite clear. We are not dealing with Surtax payers, but with people who have lived all their lives on small incomes and have been thrifty and built up a few savings.
There are six deposit friendly societies, whose total savings amount to a mere £20 million. Last year they saved just over £900,000 and, as there are over 900,000 members, there is an average saving of £1 per person a year. The average total savings of the members of these friendly societies are between £20 and £25. The biggest average is that of the teachers, which amounts to about £75 a year. We must remember that the relief for which we are asking deals not with the total savings but the interest upon them, so that the kind of annual

income from savings which the Amendment seeks to benefit is a matter of shillings rather than pounds; indeed, the average income from the interest on deposit savings would be under £1 a year.
Let me put it another way. The interest on deposits last year was £478,000 for the six societies. Of this, three-quarters was earmarked in a peculiar way for sick benefits, so that only £150,000 of that interest, spread over nearly 1 million people, is the kind of unearned income upon which income tax has any right to be levied.
The method of working the Teachers' Provident Society is that a member pays in regular contributions which entitle him to sick benefit. At the end of the year, the amount of money paid out to members in sick benefit is deducted from the income, and the balance is shared out among the members and placed to their deposit accounts. One might say that that is the amount they save during the year.
It is not as simple as that. however. The amount of money in their deposit accounts is a source from which a part may be drawn for sick benefit if members have been sick for so long that they have outstayed their right to ordinary sick benefit. This means that about one-third of these savings cannot be called savings in the ordinary cash sense. Incidentally, such sick benefit may save the Government money which it would otherwise have to pay in National Assistance benefit. In spite of this, the members are charged Income Tax on whatever is in their deposit account, including that which, if they fell ill for a long time, could be used for further sick benefit.
Roughly speaking, the Teachers' Provident Society is a kind of sickness insurance, with the addition that a member 'is encouraged to save as well in order to extend the period during which he can draw sick benefit. It has been argued by the Financial Secretary that the Government wish to make this concession only in respect of money invested in.Government securities or in the Government's own hands, but the money of friendly societies is all in trustee securities, by law, and that means that most of 'the money is invested in Government securities.
I have here particulars of the investments of the Teachers' Provident Society. They amount to roughly £4 million, in mortgages—the Government believe in a property-owning democracy and they surely would not want the Society to foreclose on its £4 million mortgages and put the money into the Post Office Savings Bank—£1 million in loans to local authorities; £5 million in Government securities; £300,000 in municipal securities; £1 million in colonial securities—and the Government surely do not want to discourage that—£100,000 in public boards and waterworks, and only £150,000 in debenture stocks. That kind of investment of a society's money is the kind which the Chancellor would want to encourage rather than discourage.
If the provident friendly societies are left without this concession, there may be a switch of their money over to the Post Office, in which case their members will receive the benefit of the concession which the Government are at present refusing them. But there will be no addition to National Savings. Surely the Chancellor does not want merely a switching of money from one to the other inside bona fide savings organisations which are of value to the country.
Who are the people for which the Amendment seeks to plead? Again, I speak of what I know—the average member of the Teachers' Provident Society. It consists largely of teachers who have lived on small salaries all their lives. They have watched their pensions dwindle in value despite the various Measures designed to increase them. If amended, the Government proposal will mean a few extra pounds for them or possibly in some cases even a few extra shillings. But that extra little amount can mean a lot to the thrifty retired public servant, the person who has been thrifty all his life. Surely, these are people whom the Chancellor would wish to include in the provision he has made under Post Office Savings?
I have spoken briefly out of consideration for the Committee, but I urge the Government to accept this as a valuable and useful Amendment to a valuable and useful proposal on the part of the Chancellor.

Mr. Mitchison: Again we come to the proviso, and I say no more about it than

that I hope the right hon. Gentleman and his hon. Friends did not mistake my growlings about the House of Commons procedure for any lack of appreciation for what they have done to help the Committee to get these matters discussed in substance. I am most grateful to them, as I am sure are all hon. Members, for allowing us to get to the real point instead of being bunkered by minor procedural matters.
As to the substance of this Amendment, it raises one general point which we have had before and I do not propose to stress again. There is no doubt that the money on deposit with friendly societies represents to some extent the savings of the weekly workers of this country. That has been argued. But it has another purpose also. There are many friendly societies, and the Teachers' Provident Society is not the only one, nor is it the largest. It is a very good instance of a professional society for a particular purpose among a group of people who are certainly by no means over-paid or over-secure as to their illness and old age.
Friendly societies for the general public have existed since 1793, and ever since that time they have served a valuable purpose, whatever the Government of the day may have done or omitted to do. Broadly speaking, they have been one refuge, sometimes the only refuge, for a very large number of people in the event of illness, bereavement or death, or in the case of accidents which occur to many of us in the course of a human life. They are a very well tried bit of machinery for the purpose.
Some of these societies require members to have certain moneys on deposit, and yet the interest on that money, which is required really for the purpose of providing these benefits, is taxable. The distinction between that and some allocation or distribution out of the funds of the society is a very fine one indeed, and I shall not try to define it tonight. But I assure the Committee that it is exceedingly difficult to draw the line, and I am not at all certain that the line is drawn at exactly the same point all over the country, though no doubt theoretically that is so, and should be so. It illustrates the extreme difficulty of drawing any distinction whatever in principle between these quite small funds, which should be


treated in a different way for tax purposes, and are in fact required for more than one object.
10.15 p.m.
These are not like the investments in savings banks, not even like the investments in the Post Office Savings Bank, and though, in fact, as my hon. Friend has so clearly pointed out, there can be no doubt that a very large proportion of them, probably practically all of them, so far as they are invested at all are invested in Government securities, it does not at all follow that they will be invested for the reason that they are, in effect, the working capital of these friendly societies and that if they were not there the societies could not perform their function and continue to perform it securely.
Whatever prejudices hon. Members opposite may have about municipal savings banks, and whatever prejudices they may have and not admit to having about co-operative societies, a friendly society is really something that I should not have thought any hon. Member could possibly wish to discourage in any way. It is true that, on the whole, friendly societies serve rather poorer people than the average, but they do a service which, whatever a Government does or does not do, clearly ought to be done, and a large part of that service enures, as my hon. Friend pointed out, to the saving of Government funds whether in the way of National Assistance or, in some cases, in connection with the Health Service. Therefore, they really ought to commend themselves to the House.
That is the first point about it, the nature of the service, the extreme difficulty of discovering what really is taxable and what is not taxable in these cases and the complete lack of principle other than the barest, nastiest, driest legal distinction between one kind of interest and another. From a human point of view, I should have thought that there could be no doubt about it.
I go one stage further. What is going to happen? These societies like others which we have been discussing tonight will be at risk if this concession is confined to the very strict limits which the Government have put on it. I believe that they will be quite particularly at

risk. After all, the banks about which we were talking earlier, though widespread, were local matters. The Co-operative societies, though they will be cramped and seriously cramped by the refusal to them of the concession, still have a trade to carry on, but these friendly societies are, in effect, doing a money business and nothing else. What they are doing is providing for the things I have mentioned and doing it out of funds provided by their members.
If those funds are going to be withdrawn and transferred to the Post Office Savings Bank, the Government are going to do themselves far more harm in the long run than they think they will gain by confining the concession strictly to bodies which necessarily invest the whole of their funds in Government securities. Through a piece of cowardice and from a lack of facing up to this question and considering what it really involves, the Government are in the long run going to involve themselves in far more expenditure by way of having to carry on through public channels something which is at present being done by a form of co-operation among the depositors concerned.
I repeat for the last time that this is something that has gone on since 1793, the need of which was recognised then, has been found useful and increasingly useful all through the changes of the nineteenth and twentieth centuries and which ought not to be crippled because on a small point of this sort the Chancellor refuses to recognise the true character of what the societies are doing. I suggest that this is a case that merits quite particular attention and that if, in fact, the concession is refused here the damaging effect on the activities of these friendly societies will be even greater than it would have been in any of the other cases we have mentioned. Serious, very serious, though I think the refusal to the co-operative societies was, this one, though it may affect a smaller number of people, is, I believe, in its own way—a different way—just as serious. I do hope that the Chancellor will say that he will accept either this Amendment or its substance.

The Financial Secretary to the Treasury (Mr. Henry Brooke): The hon. and learned Member for Kettering (Mr. Mitchison) really must rub up his history.


He says that friendly societies started in I793. There were friendly societies in this country in the sixteenth century—and may be earlier, but certainly the evidence goes back as far as that. He is speaking like one of those boys who happen at school to learn history only from the French Revolution onwards.

Mr. Mitchison: I am very glad that the right hon. Gentleman is supporting my case so generously. I can assure him that what I have said comes from being a lawyer and not a historian. Friendly societies were first recognised in the Statute Book under what is called Rose's Act in 1793.

Mr. Brooke: The hon. and learned Member is speaking as though friendly societies depended upon the action of this House, but they grew from the people. They were a natural product of the British genius, and hundreds of years passed before Parliament decided to regulate them by legislation. I hope, therefore, that as my first point I have shown that I know at least as much about friendly societies as does the hon. and learned Gentleman.
The hon. Member for Itchen (Dr. King), who eloquently moved this Amendment, spoke on behalf of the friendly societies, and spoke of them in particular connection with one profession but, as the hon. and learned Gentleman added, the subject goes much wider than that. I hope that I can speak about it with some authority, because earlier in this Session I myself piloted through this House the Friendly Societies Bill. It was such a good Bill that it almost went through both Houses of Parliament without Amendment, but in another place it was discovered that the printer had left out the word "the" so we had to have a Lords Amendment here to put it in.
This Government certainly cannot be successfully accused by hon. Members opposite of having ignored or failed to help the friendly societies. The friendly societies were grateful for that Bill; much more grateful, if I may say so, than they were for the effects of the National Health Service Act, 1948, which created very grave problems for them.
The hon. Member for Itchen has argued eloquently, as I say, that this tax-free concession should be extended to the friendly societies. The difficulty is

that however sympathetic one is towards those societies or towards the case which the hon. Member has made, it appears to us quite impossible to draw the line anywhere except at that point between those bodies which lend their funds wholly to the Government and those which exercise their freedom to invest their deposits otherwise. The friendly societies enjoy that freedom. I did not hear from either the hon. Member for Itchen or the hon. and learned Member for Kettering any suggestion that the friendly societies were willing to give up that freedom.
If that is so, and I am sure that it is, it seems to me that it would be quite impracticable to accept this Amendment and include them without including as well so many other bodies—those which we were discussing a few minutes ago; the building societies and a number of other bodies which, equally, have grown from the native genius of the British people, have accepted deposits and used them in the public interest and for the public good.

Dr. King: The right hon. Gentleman talks of drawing a line, but surely the line here is quite patent to be drawn. Everything is invested in trustee securities, and the whole financial policy is subject to Government control through the Registrar-General.

Mr. Brooke: Friendly societies are not obliged to confine the use of their deposits to lending to the Government. Nor are they under statutory limitation as to the rate of interest that they pay, as the savings banks are. We are extremely anxious to do the right thing in this matter and to treat everybody fairly, but, as my hon. Friend the Economic Secretary has explained earlier, if we do go beyond the line which we have drawn in this Clause, we do not think that we could in fairness and without discrimination stop short of including all sorts of other bodies, so that eventually we would be giving a £15 tax exemption for investment income generally.
I fully understand the case which the hon. and learned Gentleman has made for the friendly societies. I think I am known among the friendly societies as having taken a personal interest in their activities, and nobody is more interested than I in this House that they should expand those activities.

Mr. Mitchison: I am most grateful to the right hon. Gentleman for giving way. Apart from that point, and apart from the general merits of the matter, do I understand him to say that if binding arrangements could be made with a friendly society confining its investment to investments in Government stock or Government funds generally, the Chancellor of the Exchequer would be prepared to extend to the friendly society in that case the same treatment that has been offered to the Birmingham Municipal Bank?

Mr. Brooke: It would have to be on the same conditions, and my information is that the friendly societies have no desire whatever to be limited in using their deposits exclusively in lending to the State or to put themselves under any other of the statutory restrictions under which the savings banks operate. That is the simple case that I am putting. It is not a matter of sympathy or lack of sympathy. It is a matter of trying to do something that is practicable and fair. Those are the sole reasons why I have to advise the Committee that it would not be reasonable to accept this Amendment.

Mr. Mitchison: May I press the right hon. Gentleman for a moment? It is quite obvious that large parts of these deposits will not be invested at all. What is invested is invested in trustee securities—at any rate in many, if not most,

cases. If it were arranged that such investment as can properly be made were confined to Government securities or Government funds in some form, would that meet the point and allow the exemption to be extended to friendly societies?

Mr. Brooke: I do not think we can make provision for things which friendly societies do not want to do. There is not the slightest indication from anywhere that the friendly societies are willing so radically to change their policy as to confine the use of their deposits to direct lending to the State or put themselves under other statutory obligations. These questions are, therefore, entirely hypothetical.
It is certainly not for Parliament in a Finance Bill to give any sort of directions to the friendly societies. The hon. and learned Member is asking what would happen if the friendly societies were to do something which we know they do not want to do. That question is entirely hypothetical, and I do not think I can carry the matter further than I have. I have been very frank with the Committee.

Question put, That those words be there inserted:—

The Committee divided: Ayes 153, Noes 204.

Division No. 204.]
AYES
[10.29 p.m.


Albu, A. H.
Deer, G.
Hunter, A. E.


Allen, Arthur (Bosworth)
de Freitas, Geoffrey
Hynd, H. (Accrington)


Allen, Scholefield (Crewe)
Delargy, H. J.
Irvine, A. J. (Edge Hill)


Baird, J.
Dodds, N. N.
Irving, S. (Dartford)


Bellenger, Rt. Hon. F. J.
Donnelly, D. L.
Isaacs, Rt. Hon. G. A.


Bann, Hn. Wedgwood (Bristol, S. E.)
Dugdale, Rt. Hn. John (W. Brmwch)
Janner, B.


Benson, G.
Ede, Rt. Hon. J. C.
Jay, Rt. Hon. D. P. T.


Beswick, F.
Edwards, Rt. Hon. John (Brighouse)
Jeger, George (Goole)


Blackburn, F.
Edwards, Robert (Bilston)
Jeger, Mrs.Lena (Holhn &amp; St. Pncs, S.)


Blyton, W. R.
Edwards, W. J. (Stepney)
Jones, David (The Hartlepools)


Boardman, H.
Evans, Albert (Islington, S.W.)
Jones, Jack (Rotherham)


Bottomley, Rt. Hon. A. G.
Fienburgh, W.
Jones, J. Idwal (Wrexham)


Bowden, H. W. (Leicester, S.W.)
Fletcher, Eric
Jones, T. W. (Merioneth)


Boyd, T. C.
Forman, J. C.
Kenyon, C.


Braddock, Mrs. Elizabeth
Gaitskell, Rt. Hon. H. T. N.
Key, Rt. Hon. C. W.


Broughton, Dr. A. D. D.
Gibson, C. W.
King, Dr. H. M.


Burton, Miss F. E.
Gordon Walker, Rt. Hon. P. C.
Lawson, G. M.


Butler, Herbert (Hackney, C.)
Grey, C. F.
Ledger, R. J.


Butler, Mrs. Joyce (Wood Green)
Griffths, Rt. Hon. James (Llanelly)
Lever, Leslie (Ardwick)


Champion, A. J.
Griffiths, William (Exchange)
Lewis, Arthur


Chapman, W. D.
Hale, Leslie
Lindgren, G. S.


Chetwynd, G. R.
Hall, Rt. Hn. Glenvil (Colne Valley)
Logan, D. G.


Coldrick, W.
Hamilton, W. W.
MacCoIl, J. E.


Collick, P. H. (Birkenhead)




Collins, V. J. (Shoreditch &amp; Finsbury)
Hannan, W.
McKay, John (Wallsend)


Corbet, Mrs. Freda
Hayman, F. H.
McLeavy, Frank


Cove, W. G.
Healey, Denis
Mahon, Simon


Craddock, George (Bradford,S.)
Henderson, Rt. Hn. A. (Rwly Regis)
Mallalieu, E. L. (Brigg)


Cronin, J. D.
Hobson, C. R.
Mann, Mrs. dean


Grossman, R. H. 8.
Howell, Charles (Perry Barr)
Mayhew, C. P.


Darling, George (Hillsborough)
Hoy, J. H.
Mitchison, G. R.


Davies, Harold (Leek)
Hubbard, T. F.
Morris, Percy (Swansea, W.)


Davies, Stephen (Merthyr)
Hughes, Emrys (S. Ayrshire)
Mort, D. L.




Moyle, A.
Pryde, D. J.
Taylor, Bernard (Mansfield)


Neal, Harold (Bolsover)
Randall, H. E.
Taylor, John (West Lothian)


Noel-Baker, Francis (Swindon)
Rankin, John
Thomson, George (Dundee, E.)


O'Brien, Sir Thomas
Redhead, E. C.
Tomney, F.


Oliver, G. H.
Reeves, J.
Turner-Samuels, M.


Oram, A. E.
Roberts, Albert (Normanton)
Warbey, W. N.


Orbach, M.
Robinson, Kenneth (St. Pancras, N.)
Weitzman, D.


Oswald, T.
Rogers, George (Kensington, N.)
Wells, William (Walsail, N.)


Owen, W. J.
Ross, William
Wheeldon, W. E.


Paling, Rt. Hon. W. (Deame Valley)
Short, E. W.
White, Henry (Derbyshire, N.E.)


Paling, Will T. (Dewsbury)
Shurmer, P. L. E.
Willey, Frederick


Palmer, A. M. F.
Silverman, Julius (Aston)
Williams, W. R. (Openshaw)


Pargiter, G. A.
Skeffington, A. M.
Williams, W. T. (Barons Court)


Parker, J.
Slater, Mrs. H. (Stoke, N.)
Wilson, Rt. Hon. Harold (Huyton)


Parkin, B. T.
Sorensen, R. W.
Woof, R. E.


Paton, John
Sparks, J. A.
Yates, V. (Ladywood)


Pearson, A.
Stewart, Michael (Fulham)



Price, J. T. (Westhoughton)
Stones, W. (Consett)
TELLERS FOR THE AYES:


Probert, A. R.
Summerskill, Rt. Hon. E.
Mr. Simmons and Mr. Wilkins.


Proctor, W. T.
Sylvester. G. O.





NOES


Agnew, Cmdr. P. G.
Grant-Ferris, Wg Cdr. R. (Nantwich)
Marlowe, A. A. H.


Allan, R. A. (Paddington, S.)
Green, A.
Marples, A. E.


Amery, Julian (Preston, N.)
Gresham Cooke, R.
Marshall, Douglas


Arbuthnot, John
Grimston, Sir Robert (Westbury)
Mathew, R.


Armstrong, C. W.
Grosvenor, Lt.-Col. R. G.
Maudling, Rt. Hon. R.


Ashton, H.
Gurden, Harold
Maydon, Lt.-Comdr. S. L. C.


Atkins, H. E.
Hall, John (Wycombe)
Milligan, Rt. Hon. W. R.


Baldwin, A. E.
Harris, Frederic (Croydon, N.W.)
Mott-Radclyffe, C. E.


Barber, Anthony
Harris, Reader (Heston)
Nabarro, G. D. N.


Barlow, Sir John
Harrison, Col. J. H. (Eye)
Nairn, D. L. S.


Barter, John
Harvey, Ian (Harrow, E.)
Heave, Alrey


Bell, Philip (Bolton, E.)
Harvey, John (Waltharnstow, E.)
Nicholson, Godfrey (Farnham)


Bell, Ronald (Bucks, S.)
Hay, John
Nicolson, N. (B'n'm'th, E. &amp; Chr'ch)


Bevins, J. R. (Toxteth)
Heald, Rt. Hon. Sir Lionel
Nield, Basil (Chester)


Biggs-Davison, J. A.
Heath, R. Hon. E. R. G.
Noble, Comdr. A. H. P.


Birch, Rt. Hon. Nigel
Hill, Mrs. E. (Wythenshawe)
Nutting, Rt. Hon. Anthony


Bishop, F. P.
Hill, John (S. Norfolk)
Oakshott, H. D.


Black, C. W.
Hinchingbrooke, Viscount
O'Neill, Hn. Phellm (Co. Antrim, N.)


Body, R. F.
Holland-Martin, C. J.
Ormsby-Gore, Hon. W. D.


Boothby, Sir Robert
Holt, A. F.
Orr-Ewing, Charles Ian (Hendon, N.)


Bossom, Sir A. C.
Hope, Lord John
Osborne, C.


Boyle, Sir Edward
Hornsby-Smith, Miss M. P.
Page, R. G.


Braine, B. R.
Horobin, Sir Ian
Pannell, N. A. (Kirkdale)


Brooke, Rt. Hon. Henry
Horsbrugh, Rt. Hon. Dame Florence
Partridge, E.


Brooman-White, R. C.
Howard, John (Test)
Pickthorn, K. W. M.


Bullus, Wing Commander E. E.
Hughes-Young, M. H. C.
Pilkington, Capt. R. A.


Butcher, Sir Herbert
Hulbert, Sir Norman
Pitt, Miss E. M.


Butler, Rt. Hn. R. A. (Saffron Walden)
Hutchison, Sir Ian Clark (E'b'gh, W.)
Pott, H. P.


Carr, Robert
Hyde, Montgomery
Powell, J. Enoch


Cary, Sir Robert
Hylton-Foster, Sir H. B. H.
Prior-Palmer, Brig. O. L.


Channon, H.
Iremonger, T. L.
Profumo, J. D.


Clarke, Brig. Terence (Portsmh, W.)
Irvine, Bryant Godman (Rye)
Raikes, Sir Victor


Cole, Norman
Jenkins, Robert (Dulwich)
Ramsden, J. E.


Cooper-Key, E. M.
Johnson, Dr. Donald (Carlisle)
Rawlinson, Peter


Cordeaux, Lt.-Col. J. K.
Johnson, Eric (Blackley)
Redmayne, M.


Corfield, Capt. F. V.
Jones, Rt. Hon. Aubrey (Hall Green)
Rees-Davies, W. R.


Craddock, Beresford (Spelthorne)
Joseph, Sir Keith
Renton, D. L. M.


Crouch, R. F.
Joynson-Hieks, Hon. Sir Lancelot
Ridsdale, J. E.


Cunningham, Knox
Keegan, D.
Rippon, A. G. F.


Currie, G. B. H.
Kerby, Capt. H. B.
Roberts, Sir Peter (Heeley)


Dance, J. C. G.
Kerr, H. W.
Robinson, Sir Roland (Blackpool, 8.)


D'Avigdor-Goldsmid, Sir Henry
Kimball, M.
Roper, Sir Harold


Deedes, W. F.
Kirk, P. M.
Russell, R. S.


Digby, Simon Wingfield
Lagden, G. W.
Schofield, Lt.-Col. W.


Dodds-Parker, A. D.
Lancaster, Col. C. G.
Sharples, R. C.


Donaldson, Cmdr. C. E. MeA.
Leavey, J. A.
Smithers, Peter (Winchester)


Doughty, C. J. A.
Legge-Bourke, Maj. E. A. H.
Soames, Capt. C.


du Cann, E. D. L.
Legh, Hon. Peter (Petersfield)
Spearman, Sir Alexander


Eden, J. B. (Bournemouth, West)
Lindsay, Martin (Solihull)
Speir, R. M.


Elliot, Rt. Hon. W. E.
Linstead, Sir H. N.
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)


Fell, A.
Longden, Gilbert
Stevens, Geoffrey


Finlay, Graeme
Lucas, Sir Jocelyn (Portsmouth, S.)
Steward, Harold (Stockport, S.)


Fisher, Nigel
Lucas, P. B. (Brentford &amp; Chiswick)
Steward, Sir William (Woolwich, W.)


Fleetwood-Hesketh, R. F.
Macdonald, Sir Peter
Stoddart-Scott, Col. M.


Foster, John
Mackie, J. H. (Galloway)
Studholme, Sir Henry


Freeth, D. K.
Maclay, Rt. Hon. John
Summers, Sir Spencer


Garner-Evans, E. H.
Maclean, Fitzroy (Lancaster)
Taylor, Sir Charles (Eastbourne)


Gibson-Watt, D.
Macmillan, Rt. Hn. Harold(Bromley)
Teeling, W.


Glover, D.
Maddan, Martin
Thomas, P. J. M. (Conway)


Godber, J. B.
Maitland, Hon. Patrick (Lanark)
Thompson, Lt.-Cdr. R. (Croydon, S.)


Gower, H. R.
Manningham-Buller, Rt. Hn. Sir R.
Thornton-Kemsley, C. N.


Graham. Sir Fergus









Tilney, John (Wavertree)
Wakefield, Edward (Derbyshire, W.)
Wills, G. (Bridgwater)


Touche, Sir Gordon
Wall, Major Patrick
Wilson, Geoffrey (Truro)


Turner, H. F. L.
Ward, Hon. George (Worcester)
Woollam, John Victor


Turton, Rt. Hon. R. H.
Ward, Dame Irene (Tynemouth)
Yates, William (The Wrekin)


Vane, W. M. F.
Waterhouse, Capt. Rt. Hon. C.



Vaughan-Morgan, J. K.
Whitelaw, W. S. I. (Penrith &amp; Border)
TELLERS FOR THE NOES:


Vickers, Miss J. H.
Williams, Paul (Sunderland, S.)
Mr. T. G. D. Galbraitb and


Vosper, D. F.
Williams, R. Dudley (Exeter)
Mr. Bryan.

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Beswick: It would be quite wrong to let the Clause pass without some comments being made on the entirely unsatisfactory answer given to us by the Economic Secretary to the Treasury about the possibility of extending the tax concession to those societies which are registered under the Industrial and Provident Societies Acts. This Clause is completely unsatisfactory. There can be no doubt about that. It gives a limited concession in an arbitrary manner, and draws a line which has not been justified by any speech by the Government spokesmen tonight.
The Economic Secretary, in attempting to justify the line which has been drawn, said that, if he went any further, concessions would have to be extended to such organisations as building societies and the joint stock banks, but when he says that he shows how he has completely failed to understand the case which we have endeavoured to put to him. For a start, a concession has already been made to the building societies about Income Tax, and the compounding arrangements that have been made—

The Temporary Chairman (Sir Austin Hudson): Order. The hon. Member can only discuss what is in the Clause. We have dealt with the things which hon. Members wanted to put into it, and they have been voted upon. Now the hon. Member can only go into the question whether the Clause should stand part of the Bill or not.

Mr. H. Wilson: On a point of order, Sir Austin. We are now being asked to decide on the question whether these things which are in the Clause ought to be there or not, and there has been no possibility of debate so far. The Clause deals mainly with the Post Office Savings Bank. I put it to you, with great respect, that the question whether the Clause, as it emerges from the Amendments, provides discrimination against

other forms of saving is relevant to the question as to whether we should allow this Clause to go through, providing, as it does, certain facilities for Post Office savings.

The Temporary Chairman: That is not quite accurate because no Amendments have been made to the Clause. All that can be argued is that the Clause, as such, shall stand part of the Bill, not that other things should be put in.

Mr. Beswick: I accept what you say, Sir Austin, and as one reason for arguing that the Clause shall stand part in this way, the Economic Secretary said that if he had to widen the concession at all, he would have to widen it progressively to include certain other forms of saving. I am simply endeavouring to state that he completely misunderstood the arguments that we advanced against the Clause standing as it is now drawn, when the hon. Gentleman brought forward arguments about building societies and joint stock banks.
I was about to say that the building societies have already a compounding arrangement which gives them some advantage, and which it can be proved has in the past attracted a certain degree of small savings to them which previously has been invested in other worthy undertakings. It is precisely because I believe that the Clause as it stands will aggravate that kind of diversion of small savings that I am expressing by objections against it.
We have not had a single word from the speakers on the Government Front Bench about the question of diversion. They have not attempted to meet our complaint that this Clause will not increase the total amount of small savings in this country. They have not attempted to answer a single argument that has been put forward under that head. Indeed, when my hon. Friend the Member for Stechford (Mr. Roy Jenkins) made that argument, and gave some figures to show how it had affected the Birmingham Municipal Bank, the Economic Secretary to the Treasury naturally, because he is


familiar with matters inside his own constituency, said he appreciated that some diversion would follow. Yet when we put forward the same argument about other savings institutions, the Government spokesmen are completely silent, and they do not endeavour to answer the criticisms and anxieties that we voiced.
I must also say that I was a little surprised in the course of this discussion to hear the Economic Secretary throw off, as it were incidentally, a proposal about one of the Amendments when we were discussing another one. I felt that it was a little discourteous that the hon. Gentleman should have made this proposal incidentally—

The Temporary Chairman: Order. We really cannot re-discuss the Amendments. The hon. Member can discuss what is in the Clause at the present moment. I agree that it is a narrow discussion.

Mr. Beswick: Naturally I accept your Ruling, Sir Austin.
I still feel that as the Clause stands the problem of the diversion of savings from one savings institution to another is still with us, and I am hoping that we shall have a better reply from the Government spokesmen than we have had so far.

10.45 p.m.

Mr. Dodds: Following up the point made by my hon. Friend the Member for Uxbridge (Mr. Beswick), this is a matter of fundamental importance to a movement in which millions of people are concerned. It would be a matter of grave injustice if the Clause, as at present drafted, were allowed to stand part of the Bill.
Pressed as to the cost if the concession were granted, the Economic Secretary introduced the fact that if the Clause were altered it would mean a loss to the Treasury of between £10 million and £40 million. Asked how he knew, the hon. Gentleman clearly revealed the attitude which he and his colleagues on the Front Bench have adopted all the time. Their attitude is that they could not care less about the subject, and want to dispose of it without giving adequate reasons for rejecting a Clause which would have been improved if our Amendments had been accepted. I ask the

Economic Secretary to explain what effort the Government have made to ensure that the Clause is improved in view of their rejection of one of our Amendments earlier.
There is ample evidence to indicate that there will be a transference of savings from one organisation to another. There seemed to be acceptance by the Government Front Bench of the case that already money had been transferred from the Birmingham Municipal Bank and was likely to go into the other forms of savings. Throughout the land there are indications that savers are going to transfer their savings, if they have not already done so, from the savings department of the Co-operative movement to the Chancellor's new form of saving. I hope the Chancellor will take note of the fact that it is a matter of transferring not £1, £2, £3, £5 or £10, but sums of £80, £100 or £150. The Chancellor and many of his hon. Friends pay lip service to the great social work of the Co-operative movement, and I ask the Chancellor very seriously to consider the implications—

The Temporary Chairman: The hon. Gentleman cannot again go into the question of the Co-operative societies. We have discussed that subject already.

Mr. Dodds: Surely, Sir Austin, I must specify where harm will be done if the Clause is passed. There is evidence for rejecting the Clause which the Government have not taken the trouble to obtain. I ask them to take the point about savings seriously.
It takes a great deal to stir the Co-operative movement. Unless there are second thoughts on this point, it will mean not one nail but many nails in the Tory coffin as a consequence of this grave injustice.

Mr. Arbuthnot: I very much regret, as do many of my hon. Friends, what we feel to be the totally unnecessary and pinpricking action of taking the whole of a subsection to delete the Surtax payer from the benefit of the Clause. There is no money to speak of involved in that. It is most regrettable that the Surtax payer should not be granted exemption from Surtax on the £15 in the same way as exemption is being allowed to the Income Tax payer.

Mr. Ron Ledger: This Clause is extremely bad because it is a discriminatory Clause. In this respect I am sure that I will not be out of order every time I mention the Co-operative societies because the "Co-op," among many others, will be discriminated against. If you rule me out of order, Sir Austin. then the Chancellor will lose some useful education, because he did not think fit to be here when we were discussing the savings of two-thirds of the families in the country.

The Temporary Chairman: I am afraid that the hon. Gentleman is out of order. We have disposed of the Amendment about the Co-operative societies. The Committee has come to a decision on that.

Mr. Beswick: Although we have disposed of the Amendment which suggested that Co-operative societies should be brought within the Clause, surely we can deal with the position of the Co-operative societies under the Clause as it stands. The fact is that the Clause will have a direct effect on the Co-operative movement. Surely, therefore, we are entitled to point out what the effect will be before we accept the Clause.

The Temporary Chairman: The hon. Member would have been in order if Co-operative societies had been dealt with in the Clause. They are not in the Clause. They have been left out deliberately by the Committee.

Mr. H. Wilson: Further to that point of order. It would be a pity if an acrimonious note were to enter into our proceedings at this late hour, the more so as my Co-operative society friends have been so very co-operative during the earlier stage of our proceedings. With the greatest respect I suggest that what we are debating is whether the Clause should or should not stand part of the Bill. I fully agree that it would be wrong for my hon. Friends at this stage to propose that Co-operative societies should be included in the benefits which will accrue to the Post Office under the Clause, but I submit that one of the considerations governing the Committee's decision on the Clause is whether it is now too narrow. I submit that it is legitimate that my hon. Friends should be able to say, if that is what they feel, that this

is a bad Clause because the Co-operative societies have been kept out of it.

The Temporary Chairman: That is a very ingenious argument. I have to follow the rules of the Committee, and it has always been the rule that if a decision has been taken on an Amendment it cannot be debated again. In this case I thought the hon. Member was debating the question of the Co-operative Society again. If he narrows the argument down to the fact that this is a bad Clause because it is against the Co-operative Society then, within reason, I will allow him to proceed.

Mr. Ledger: I do not feel that you are conceding a considerable amount, Sir Austin, because we have made the argument. The point is that it is Co-operative Society money which will be concerned. That is the reason why I argue that this is a bad Clause. We feel that we have been somewhat misled by the Chancellor, because he gave every indication that he intended to encourage savings. What he did not do was to tell us that in actual fact he was going to arrange for a transfer of savings, and that he was going into business against the Co-operative movement and similar savings institutions. He did not make that clear.
Now the Economic Secretary has told us that he was most concerned that money that was saved should be loaned directly to the Government. We feel that the Chancellor has deliberately attempted to filch from other savings organisations money which he wants to go into the Post Office Savings Bank.
Although the Chancellor cannot possibly be here all the time, we noticed that the Chamber was fairly full when we were discussing the problem of a few hundred thousand Surtax payers. When we began to discuss the matter of the savings of the 11 million members of the Co-operative movement, however, the Chancellor was absent. It should be remembered that those savings are the savings of two-thirds of the families in the country. We were all the more concerned because this provision may defeat the Chancellor's objective. Let us assume that he gets extra money into the Post Office Savings Bank, and that that money comes, in part, from the Co-operative movement. What, then, if the Co-operative movement, in order to obtain capital, has to go elsewhere?

The Temporary Chairman: That is exactly what we were discussing upon the Amendment. The hon. Member must return to the subject of the Clause as it stands.

Mr. Ledger: With due respect, Sir Austin, I was here throughout the debate and I did not hear this point being made.

The Temporary Chairman: That has nothing to do with me. It is not relevant to the Clause.

Mr. Ledger: You are certainly making it difficult for me, Sir Austin.

Hon. Members: Order.

Mr. Ledger: I am being confined in a way which will not allow me to defend an institution which is being affected by the Clause. It is all very well for hon. Members opposite to yell "Order," but they are completely disinterested, as they have shown this afternoon and this evening.

The Temporary Chairman: The hon. Member is merely making his speech at the wrong time. He should have spoken, if he had caught the Chairman's eye, during the debate on the Amendment, and not on the Question, "That the Clause stand part of the Bill". On this Question I have to carry out my duty of making Members keep to the point of what is in the Clause, and not what they hoped would be in it but is not because the Amendment has been defeated.

Mr. Ledger: If, then, the finances of an organisation are affected by the Clause, is it out of order for me to discuss those finances and the movement to which they belong?

The Temporary Chairman: Certainly, if the matter has already been discussed and decided by the Committee.

Mr. Jay: It would be in order, would it not, Sir Austin, for my hon. Friend to argue that the Clause, as it stands, discriminates in favour of certain institutions and against others, and that that discrimination will have certain effects upon one or many of those institutions? If he argues upon those lines would not he be in order?

The Temporary Chairman: He would on a general discussion of the point. I am sorry, because there is a difficulty on occasions such as this. I do not want to make the hon. Member sit down, but it is clearly laid down by the House that if an Amendment has been discussed and voted upon, or disposed of in some other way, it cannot again be argued; it is finished with. The hon. Member can deal with what is in the Clause now, butt not what has gone before. That is a clear Ruling of the Chair, and I must adhere to it.

Mr. Ledger: You may not want to make me sit down. Sir Austin, but you are making it extremely difficult for me to stand up. I am very pleased to receive the advice you have given about the time at which I should have raised this matter. It appears that I, being co-operative earlier, accepted some advice which was not quite so good as I thought. I wanted to make the point earlier, but I was assured that, as the funds of the Co-operative movement were going to be affected by the Clause. I would be in order in discussing them.
It is very important that every Member of the Committee should bear in mind the fact that it is not just a question of my not being allowed to voice an opinion here tonight but that, in fact, I am being denied the right to voice the opinion of the 11 million members of the Co-operative movement. In fact, you are denying the right of a Member to protect the savings of two-thirds of the families of this country.

11.0 p.m.

The Deputy-Chairman (Sir Rhys Hopkin Morris): Order. The Chair has already ruled that matter to be out of order. and therefore the hon. Member cannot return to it.

Mr. Ledger: This situation is not being made any easier by the fact that the number of Chairmen seems to have been increased by a number of hon. Members on the opposite benches.

The Deputy-Chairman: Order. The hon. Member really must try to observe the rules of order and to direct himself to the Question before the Committee.

Mr. Ledger: I apologise if I have gone outside the bounds, but it was not intended. Difficulties seem to have been created for me.
It appears that there is very little else that one can say, and my speech has been very effectively put to an end by the limitations which have been placed on me, even before I started. So I shall have to content myself with saying at this stage that of course I regret that I am unable to defend the Co-operative movement from this attack because in doing so I shall be ruled out of order on the discussion of this Clause.

Mr. H. Wilson: We have had some difficulty, Sir Rhys, in establishing on our side of the Committee what is and what is not in order on this Question, and I hope that in the moment or two in which I wish to address the Committee I shall contrive to keep entirely within order, as I usually try to do.
The first point that I want to make relates not to the Co-operative movement or to the Kirkintilloch Municipal Bank, or to any of the matters which have been debated in the Amendments which we have had before us. I first wish to ask the Chancellor of the Exchequer whether he will deal with the question of joint accounts in relation to the Post Office Savings Bank. As we understand it, and I think that this was explained at an earlier stage, in the Budget debate itself, this new concession will apply to each separate account in the Post Office Savings Bank, to the limit of one account per individual.
In other words, a man and wife are able to claim £30 interest-free concession, and, as I understand it, if there were two or three children in the family, also with Post Office Savings Bank accounts, the same would be true—a £15 concession would apply in respect of each of them. Perhaps that could be made clear, because it does rather govern our attitude on whether this Clause should stand part of the Bill or not. Some of my hon. Friends and I felt that the Clause was rather imperfectly drafted in that respect. I sought to move an Amendment to clarify the position of the joint accounts, but that particular Amendment was not selected, so I think it would be improper of me to attempt to debate it at this point, but I hope that the Chancellor will give us a clear ruling on this question.
The second question relates to Surtax. I am in some difficulty as, like the Chancellor, I was out of the Chamber for a few moments. There was an Amendment on the Order Paper in the name of the hon. Member for Dover (Mr. Arbuthnot), which somehow seems to have got squeezed out, or perhaps it was not called.

Mr. Arbuthnot: Perhaps it will help the right hon. Gentleman if I say that I have referred to it on the Question, "That the Clause stand part of the Bill."

Mr. Wilson: I was aware of that. I was wondering why it was not moved earlier. I did not know whether the hon. Member withdrew it because he did not believe in it, or whether it got squeezed out in the rather unusual proceedings which took place in respect of the double Amendments on the Birmingham Municipal Bank and the other municipal banks, which caused some difficulties for members of the Committee.
Even though that Amendment was not moved, I want to assure the Chancellor that so far as Surtax is concerned we are in full agreement with the Government on that particular point. After all, the motive of Clause 8 is to increase small savings and not to provide any advantage to the Surtax payer.
I now turn to the broad question, which I am sure is in order, of whether this Clause will help to increase small savings, which is the Chancellor's intention, and whether it will do it without too much harm to the economic situation generally and the various institutions that contribute to the economic situation, including not only the Co-operative movement but the banking system generally.
When the Committee decides, as we shall be called upon to do in another hour or two, whether it is right that this Clause should stand part of the Bill, we shall have to ask ourselves, first, whether the Chancellor is justified in introducing this new and novel form of discrimination. This is not the only way in which he could have increased Post Office savings. For example, he might have increased the interest rate. I know that I should be out of order were I to move an Amendment or to suggest that at any stage of the proceedings on this Bill, though I think it


fair to mention that as a possibility. It might have been a better thing to have done, because, of course, the Clause as it stands applies only to the savings of those who pay Income Tax.
There are many potential savers in this country who do not pay Income Tax and who get no incentive under this or any other Clause in the Bill. I well understand the motive of the Chancellor. It is, of course, that he fully realises that, with the present cost of living, it is impossible for them to save anyway, and so it is no use making an appeal to them to do so. But I am not sure that the right hon. Gentleman was right to keep the interest on Post Office savings artificially low—I say artificially low in relation to the present level of Bank Rate, which I do not propose to discuss, as I am sure that I should be out of order in so doing—and then to try to get the same result as an increase in the interest rate so far as a small class, or at any rate, a section of the community, is concerned by this concession with regard to Income Tax.
The Chancellor realises—and this has become very clear from the speeches of the Economic and the Financial Secretaries—that we have a very uncomfortable form of discrimination introduced. When we proposed that the discrimination should be extended to cover other forms of saving—I will not say what they are as I do not want to be out of order—it was put to us that that would open wide the door to all kinds of other forms of saving; building societies, joint stock banks and many others. That is true and, of course, the result is that we now see that the Chancellor has created a deliberate system of discrimination as between the Post Office Savings Bank on the one hand it is reinforced by the Birmingham Municipal Bank—and the whole system of other kinds of saving.
This is something new. It is now nearly a hundred years since William Ewart Gladstone, the then Chancellor—and what he would have thought about the right hon. Gentleman's Budget and this Bill defies imagination and also the rules of order, so I will not proceed to enlarge upon that—with a very imaginative gesture, proposed the establishment of the Post Office Savings Bank as one means of channeling small savings

into the service of the State for State dealing. In the more than ninety years since that was done no Chancellor, so far as I know, has ever proposed this form of discrimination, so far as the fiscal system is concerned, between the Post Office Savings Bank on the one hand and all the other forms of saving on the other.
Therefore, I think that we should have some very strong justification put forward before we can agree that this Clause should stand part of the Bill. We have not had that justification at this or any other stage of the Bill. There must be some strong and clear advantage put forward, if we are to accept Clause 8.
It will not have escaped the attention of the Committee, indeed the point has been made once or twice, that other institutions will feel themselves severely prejudiced by the fact that they cannot participate in this discrimination. Not only will they feel prejudiced by being left out in the cold, it is bad enough to be denied a concession, but it will become clear—with respect I do not think that in saying this I am trespassing into the forbidden territory in which my hon. Friend found himself recently—that these other savings institutions are not merely denied the concession—obviously, I cannot press that they should get the concession because that would be out of order—but they will also be prejudiced by the fact that some of the savings in them will be taken away and put into the Post Office Savings Bank. That would not happen if Clause 8 were not part of the Bill. Therefore, I submit, Sir Rhys, that it is in order to discuss that point.
In other words, if I am right about this—and this may be of guidance to my hon. Friends—if it is wrong to suggest that the Co-operative societies should get concessions, it is not wrong to suggest that the Clause should not stand part of the Bill, because it has a serious effect on diverting savings from the Co-operative societies into the Post Office Savings Bank.
It has been said that this Clause is unlikely to lead to an increase in the total volume of small savings but will lead to a diversion of such savings. I am now talking about the broader issue. The Chancellor of the Exchequer is right to


hope for an increase in small savings. One might say that he is gambling on an increase in savings in this Finance Bill. But quite apart from the issue of the Co-operative societies and the other institutions which have been mentioned, I should have thought—and it seems to be a view generally held in the City; it was mentioned in the April issue of the Banker, I believe—that such increases as we may expect to see in Post Office savings as a result of this concession will be the result purely of diversion.
I do not know whether the Chancellor feels that a diversion of savings at present lying idle and dormant in joint stock banks into the Post Office Savings Bank is of itself disinflation. It will be interesting to hear the Chancellor's views, even at this time of night. There are some who argue that a diversion of savings at present lying dormant in joint stock banks to the Post Office Savings Bank does not increase the volume of savings. There are some who might say that it would be disinflationary.
This is really the point of what the Chancellor called the private funding operation in his Budget speech. The Chancellor was rather befogged by all the arguments in the City about funding and Treasury Bills, but he came out at one point with the argument that the more people saved the more private funding would be going on, and I am sure that that statement was unexceptionable and was generally welcomed.
I wonder whether the Chancellor regards as funding a mere transfer of money lying idle in the joint stock banks to the Post Office Savings Bank. In so far as it enables him to suspend all Treasury bill borrowing, it will be to some extent disinflationary. I should think that that thought is probably in his mind already. It might be argued that that would have an effect on the deposits of the joint stock banks. It might be argued that it would have an effect on the cash base of the general stock banks and that that of itself, in so far as any banks these days pay any attention to the cash ratio, would affect their advances, and therefore would be more successful, in relation to the Chancellor's policy of reducing bank advances, than all the other weapons such as the Bank Rate.
It would be interesting, in order that we could decide whether or not Clause 8 should stand part of the Bill, if the Chancellor or the Economic Secretary would tell us whether he would be satisfied or gratified by a pure transfer from the joint stock banks into the Post Office Savings Bank. We all feel that by introducing this element of discrimination he has done a potentially dangerous thing, and we want to be convinced that it is really worth doing. We are in no doubt that it will prejudice severely a number of important bodies including the friendly societies and the Co-operative societies, and I suggest that it is up to the Chancellor to justify as necessary and desirable the proposition contained in the Clause.
If the right hon. Gentleman can convince us that it will bring great benefit to outweigh the harm that we have established will occur in other directions, perhaps his time will not have been wasted, and we may be able to feel that the Clause can really stand part of the Bill.

11.15 p.m.

The Chancellor of the Exchequer (Mr. Harold Macmillan): I will not venture too deeply into the philosophic thoughts of the right hon. Member for Huyton (Mr. H. Wilson) as to what Mr. Gladstone might have said in 1956; but I would point out to him, when he claims that no justification has been made for this Clause from the Treasury Bench, that there is no provision under our rules of procedure for justifying it before the Question "That the Clause stand part of the Bill." Amendments are considered, and then we come to discussion on the broad theme of the Clause; and, therefore, his claim that no justification for it has been made out represents a complete misconception of the way in which we conduct our debates.
I do not think that I need bother myself about the remarks of the hon. Member for Romford (Mr. Ledger). I have been thirty years in this House, and I do not think that I have ever been accused of discourtesy in the matter of my attendance here. I have been present since half-past three today, except for a short absence for a meeting of Ministers and for some refreshment, and I do not think there is really any obligation for one to sit through more than nine out of ten hours of a debate.
This proposal, in its broad theme—and having dealt with the Amendments—is one which for years has been pressed upon successive Chancellors of the Exchequer by the great National Savings Movement. Indeed I know of no concession which has given more pleasure or encouragement to that movement than this concession. Every delegate in any conference I have been to—and hon. Members who play a great part in the movement will agree with me—has thought that this is something which should be done. It is something which it has long asked for, and which has given great encouragement to it.
It is, of course, one of the many encouragements in this Budget. It would be out of order to discuss it, or to go too far into the monetary problems to which the right hon. Gentleman the Member for Huyton referred. The National Savings Movement has asked for this concession, and is glad to have got it. For my part, I have to ask myself, "Is it right to give this concession?" I think that there is this very clear distinction—and nobody put it better than the hon. Member for Stechford (Mr. Roy Jenkins), in moving his first Amendment—between this and saving generally. The hon. Gentleman put it much better than I could hope to; he understood the point perfectly. The justification for this concession, limited in this way, is that it is not intended as a general encouragement. We have other proposals to do that; the new bonds scheme—Clause 35—and all sorts of ideas in this package deal.
What we are here concerned with is to encourage that particular form of saving which the right hon. Member for Huyton rightly says will greatly assist the Government's monetary policy. The hon. Member for Stechford understood perfectly when he asked about the Birmingham Municipal Bank, and my hon. Friend the Economic Secretary agreed that if it brought itself within the two main features of this kind of savings institution, it could have the advantage of the concession.
What were those two features? First, that the rate of interest should be static at 2½ per cent., and that the money saved would pass directly to the Government. It would therefore assist the Government's monetary policy because more of the State's borrowing needs would be met

without increasing the liquidity of the joint stock banks.
That is the dual aspect of this form of saving upon which I have given this kind of concession: first, the statutory limitation to the 2½ per cent., and, secondly, the automatic passing of the money saved in such a way as most to benefit the broad monetary policy which we are pursuing, and to finance Government borrowing without automatically increasing the liquidity of the joint stock banks.
Therefore, when I had to draw the line, it was here that I had to draw it. Some may say it is a bad policy, but it is a perfectly sensible line. That was why the hon. Member for Stechford quite properly accepted that position, and asked, "If we can bring our institution within that line, shall we get the concession? "We said, "Yes." I say again that if any other institution will bring itself within that line, this concession and this form of encouragement to saving will become available.

Mr. H. Wilson: Are we to understand, then, from what the Chancellor has said about the liquidity of the banks, that this major change in taxation—and it must be regarded as such—has been introduced by the Chancellor and accepted by him just because he accepts conventional ideas and bank conventions about their standards and canons of liquidity? If he was making a major change, why did he not make a change in the bank conventions rather than in the taxation law?

Mr. Macmillan: The right hon. Gentleman knows quite well that, whether the liquidity ratios are worked on a conventional or upon an imposed basis, this form of saving must of itself be beneficial from the general monetary point of view; and it was accepted by, I understand, the greatest economic expert in the party behind the right hon. Gentleman—the hon. Member for Stechford.
That leads to the reason why we have drawn the line. It is not because we have any personal feelings about the Co-operative societies—the accusations of the hon. Member for Romford have no meaning at all—or the building societies, friendly societies or any other discrimination. There are simply the two conditions, the 2½ per cent. and the direct passing of this form of saved money to the Government.

Mr. Beswick: Will the right hon. Gentleman answer two questions? He is saying why he has drawn the line in this way. Are we now to understand that this is not simply a device to help us out of a difficult temporary situation but will become a permanent part of our taxation principle and policy?

Mr. Macmillan: I think it will be a permanent part—the hon. Member calls it taxation, but I would call it non-taxation policy—that the people who make savings and are content with a statutory rate of 2½ per cent. and no other possibilities of benefit by way of interest, and who are content that their money should pass directly to the Government, will, within the limitation of this proposal in the Clause, receive this Income Tax relief.

Mr. Beswick: Will the right hon. Gentleman, then, be good enough to answer a further question? If, as he envisages, this becomes a permanent part of our system—he has outlined what he conceives to be the advantages of drawing the line in this way—has he taken into account the disadvantages which follow from drawing the line in this way: namely, the diversion of savings from one institution into another? Does he really think there will be a net addition to the total of small savings?

Mr. Macmillan: I was coming to that matter; it is the second point to which I was addressing myself. The hon. Member used the word "permanent". I think it will be for the remaining four years of this Government and, I suppose, for the five years of the next Conservative Government. I cannot make any absolute promise for more than the next ten or fifteen years.
Now, I wish to refer to the effect. It is undoubtedly true that some money may be attracted from other savings agencies. That is true of all these plans. If we make a whole lot of these methods of saving attractive we cannot be certain there will not be some switching, but I think that the broad effect, if we have these different forms of saving, will be attractive in different ways to different types of people, and that we shall increase the total volume of saving. That is the object of the exercise. If we do not do that, we shall have failed.
In many forms of commerce and industry—and I have been in many of them

—the greater the range of goods made available for the different classes of purchasers, the greater is the likelihood of increasing the total volume of sales. I am not, of course, denying that there may be some switching here and there. Of course, it cannot be done beyond a limit, but I think that the total volume will tend to increase.
I am encouraged in thinking that, not because it is my view, but because it is the view of those who have given their lives to unpaid, voluntary service for the Savings Movement. It is what they, the people I have confidence in, the leaders of the Savings Movement, have asked for. I think, therefore, it is well worth while our having a try, to see if it will succeed. I want to make it clear that the drawing of the line is not discriminatory in the sense of being due to ill-feeling, or malevolence towards the friendly societies or the building societies, which we all in different ways support. It is based on the two conditions that I have tried to set out.

Mr. Dodds: Will the right hon. Gentleman answer one question? In drawing this line, what consideration did he give to the harm it can do to the Co-operative movement, this people's movement? Has he given any consideration to that? Or has he not? If he has not, is it because he thinks it does not count in the economic and social life of the country?

Mr. Macmillan: Of course, and as I mentioned, all these movements, the building societies, the friendly societies, the Co-operative societies. the different types of trustee bank, are claimants for this concession, but they cannot, in my view, be participants because they do not conform to the two conditions which I have laid down in making this concession.

Mr. Dodds: The question I asked was, has the right hon. Gentleman given any consideration to the harm it will do to the Co-operative movement and the others?

Mr. Macmillan: The hon. Member is very fond of making assertions—

Mr. Dodds: I asked a question.

Mr. Macmillan: Of course I have given consideration to this matter. That


is what we are discussing tonight, and there have been four or five months of discussion of it. No doubt, there will be some switching—I have said it twice, and I say it again. There will be some, of course, but I say that in my view the greater the range of attractive opportunities for saving that we present to the people the greater will be the hope of increasing the total volume, and that is, after all, the great national concern and interest.
There are one or two points of detail which the right hon. Gentleman asked me on the subject of separate or joint accounts. It will, of course, be possible for a man and his wife to have separate accounts. If they have a joint account, I am informed, the joint account can be, where necessary, apportioned between the joint holders in accordance with the way in which they have agreed to divide it between them. Since the Surtax question does not arise, of course, it has not quite the importance that it would have had had this concession been made to apply tc Surtax also.
Here I should like to say just one word about that aspect. We have not extended this concession to cover Surtax. I will be frank about it. It is really very simple. It is not because I think there would be queues of excited tycoons standing outside the post offices wishing to invest, say, £300 to save £2 10s. or so a year on their Sur-taxable income. It is not really necessary; I do not think they would attempt to do it. It is because this proposal conforms to the principle which has been followed in the past, which I think it is right to follow now.
11.30 p.m.
Let us take the mathematical computation. Everyone will receive Income Tax exemption on £15. The £15 will not be taken into account at all in computing Income Tax liability. Supposing, for the mathematical point, that a man paid tax at 8s. 6d., the 2½ per cent. tax free would means a 4½ per cent. return, subject to tax. But if we were to make the Surtax concession, then for a payer at the top rate, to illustrate the argument, the 2½ per cent. tax free would be equal to 33½ per cent. gross return, and I should have difficulty in granting a tax exemption on that scale.
Therefore what we are doing is to apply exactly the same procedure here as applies to interest received tax free from building societies today. That is to say, it is grossed up, the £15 becomes £26 for Surtax purposes. So we are doing nothing new. It is exactly the same procedure as where there is a tax-free return from a building society. After all, the proposal in the Clause is intended for the small or moderate saver, and it would be wise to follow the precedent and not to create what would be an anomaly if we were to introduce a Surtax concession also.
I hope that what I have said will make the Committee feel that it would be wise to give this Clause a chance. I am bound to say—and I have had but short experience of it—that when one starts to make concessions one gets into a lot of trouble. First one set of people say that it is a bad concession. Then, having said that, they say, "Yes, but we want to get in on it". Between one thing and another one gets terribly harried by making concesssions
Nevertheless I think that this is a right one to make. I am confirmed in that thought by the attempts over many years of the National Savings movement to obtain it. As I said in the Budget, it is a challenge to the National Savings movement to make good use of it.

Mr. H. Wilson: Before the right hon. Gentleman leaves that point, I want to put another question to him, on which he has given a partial answer, but not, so far as I am concerned, a very clear answer, and I hope that he will clarify the position before we go further on this point. I am referring to the question of separate accounts in the Post Office held by different members of the same family. The right hon. Gentleman explained what would be the position of a joint account, namely that there will be some attempt to apportion, where necessary, between the joint holders. Am I right in assuming that if one individual has two Post Office books he is entitled to a concession on only one?

Mr. Macmillan: indicated assent.

Mr. Wilson: One individual is entitled only to one concession? Is that right? Secondly, where a man and his wife both have books and each has an account, which is very common, would I be right in assuming that the total concession for


husband and wife comes to £30 or only to £15? Furthermore, what is the position where a child has an account, or where a number of children have an account? To give a practical illustration to the Chancellor, on which he might care to give a ruling, in my family I have two accounts, my wife has one, my son has one. Suppose we have five savings accounts—I am afraid that we have not—to the tune of £15 a year each—which is ex hypothesi impossible at the moment—would the Chancellor say whether the total concession would be in respect of £15, £30, £45 or £60? It appears as though the occupants of the Treasury Bench are in some doubt about this question, but perhaps the right hon. Gentleman will give us a clear answer?

Mr. Macmillan: I am sorry if I was obscure. There were two points. One was about a separate account, the other about a joint account. The right hon. Gentleman is satisfied with what I said about the joint account. I said that one could have any number of separate accounts, so long as they are all for separate people. The right hon. Gentleman can have a separate account for himself and his wife can have an account, and his twenty children also, but with this proviso, that the children's account must not have been provided by the parents. [Laughter.] What it amounts to is that, in practice, there will be either a joint account, which some people choose to have, or a separate account for a man or a woman, and then there will be separate concessions.

Mr. Wilson: On a point of order. I disclaim having twenty children. Let us have that upon the record.

Mr. H. Hynd: It has been very interesting to listen to the Chancellor praising those worthy citizens who are going to be content with a return of 2½ per cent. interest on their savings. By implication, he is condemning the other people, whom he described as tycoons, who are not satisfied with 2½ per cent. and want a great deal more. I do not know what hon. Members behind him thought when they heard him make that statement.
The Chancellor has not answered the Opposition's criticisms. The Clause should not be allowed to stand part of

the Bill for two main reasons: first, it creates an anomaly, and, second, it will do harm to other forms of saving. The Chancellor has told us that, in his opinion, there will be very little switching from one kind of saving to another. I think he is wrong. In fact, I would go so far as to say that he is basing his hope for the success of the Clause on a great deal of switching, and that, unless there is a great deal of it, he will not achieve what he seeks through the Clause.
I believe that he has framed the Clause on the basis of the experience which he gained as Minister of Housing and Local Government. He is playing the same trick with savings as he played with housing. He made a temporary transfer of building labour from certain types of building to house building and thus achieved a certain amount of popularity. He is playing the same trick by having transfers from the Co-operative societies and other forms of saving to the Post Office and trustee savings banks.
I am about to say something which I am sure will not be supported by hon. Friends of mine such as the hon. Members for Erith and Crayford (Mr. Dodds), Romford (Mr. Ledger) and Uxbridge (Mr. Beswick). I do not altogether blame the Chancellor. He has been aided and abetted by many members of Co-operative societies and others who mistakenly gave him their votes at the General Election, believing that they would not be doing anything politically harmful. I hope that one of the results of the trick that he is now playing will be that some of those Co-operators will wake up and cast their votes differently at the next General Election.

Mr. Mitchison: Just now I heard the Chancellor say that if parents give a child some money put by one or other of them into the Savings Bank, the money, because it has been given to the child, will not benefit from the concession if one of the parents is also getting the concession. I suggest to the Chancellor that, if he said that, he must have made for the moment one of those slips which even the best people make at times. Surely the child must be entitled to the concession if the money is its property. It is true that it may not make much difference unless the child has other property, but if the child has other property—such things happen—it would


make a difference. May I ask the Chancellor to clear that point up, if possible?

Mr. H. Macmillan: I said it because I believe it to be correct. In the tax year at the beginning of which a child is a minor and unmarried any interest received by it on deposits given to it by its parents will rank as income of the parent and not of the child for this and other taxation purposes. That. I think. is provided for. I think I am correct. I will have that point carefully checked to see whether the information I am providing is right or wrong.

Mr. H. Hynd: Is that possible administratively? A parent gives a child a certain amount of pocket money. As part of the pocket money ls. or 2s. 6d. a week may be put into the child's savings account. How can one say whether that money belongs to the child or not? Surely, in practice the money will belong to the child, and however many children open savings accounts they will get the benefit of the Clause.

Mr. Macmillan: I think that that is the law, not of this Bill, but of the Income Tax Acts. I think that under those Acts interest on deposits provided by the parent would rank as part of the income of the parent.
Question put and agreed to.
Clause ordered to stand part of the Bill.

Mr. H. Wilson: I beg to move, That the Chairman do report Progress and ask leave to sit again.
I am sure that we have reached a time when it would be suitable to "pack up". I know that it is a disappointment to the Chancellor, just as it is to hon. Members on this side of the Committee, that we have not made more progress. I should have thought it reasonable to say that we should have got a little further. I remind hon. Members opposite who have shown signs of impatience in the last few minutes that if we had not spent two or three hours this afternoon debating the position of the Surtax payers we should have been able to make further progress. Hon. Gentlemen opposite who objected to my hon. Friends pressing the argument about the 11 million Co-operators in this country are really not in a position to complain in view of the fact

that we spent so long discussing mainly the position of the 290,000 Surtax payers. I do not object to that discussion. I think it perfectly fair that we should have spent time on that.

Viscount Hinchingbrooke: There were five speeches.

Mr. Wilson: There were far more than five speeches. As the Lord Privy Seal said earlier, this House of Commons is free. We are free to move Amendments. Some day we may get free votes on some of these matters, and then we shall get different results.
I think that we might have reached Clause 11. I am afraid, however, that the time taken earlier has made that impossible. Even so, my hon. Friends who wanted to say a lot more about the Co-operative movement feel that they have not had the opportunity that they would have liked. I hope that we make better progress next time, and I should like to ask the Chancellor whether he thinks that it would be convenient to report Progress now.

Mr. H. Macmillan: I am grateful to the Opposition—to all sides of the Committee—who have co-operated to make as good progress as we can with the Bill. At the same time, I think it would be to everybody's convenience if we could make a little more progress tonight. There is very little of importance in the next Clause. I think it will go very rapidly—[HON. MEMBERS: "No."]. We might try it, at all events. Clause 10 is not of great importance. There is no Amendment proposed to Clause 11.
I thought that it might be convenient if we could start our proceedings on Monday with consideration of Clause 12. which is a very big Clause. There are a large number of issues on that. I cannot conceive of a Division on Clauses 9, 10 and 11. If we could dispose of them, then we could start with Clause 12 at the beginning of our work on Monday.

11.45 p.m.

Mr. H. Wilson: This has placed us in some difficulty but I know that the Government are also in some difficulty, because there had been hopes that we should get a little further tonight. Clause 9 is a very important one, which has aroused a great deal of controversy. It is almost the father of an international


incident, so far as we are aware. To listen to various remarks made about it, one would almost expect an American gunboat to sail up the Thames at any time. It is therefore a matter which we might take a considerable time to debate.
We know that the Chancellor is going to give way to the pressures to which he has been subjected, and it seems to us a very late hour at which to start, but I find it very difficult to object if he insists upon going on. I cannot say that we shall refuse to co-operate in the matter, or that we shall press the matter to a Division—it is rather late for doing that—but I cannot give the Chancellor any undertaking that we shall get to the end of Clause 9 in what he might consider a reasonable time.
If we do not make quick progress upon it, I hope that he will not feel that there is any bad faith upon our side of the Committee. We shall want to examine the Clause, or any changes which he proposes to make in it, very fully and carefully. I am sorry if that takes us past midnight; the Chancellor will probably have heard from his predecessor that debates on Finance Bills which go beyond midnight are not very profitable undertakings for the Government. If he insists, however, we can only acquiesce in the situation; but we may wish to return to the subject at another stage in the Bill, and have a fuller examination of some of the points, and an opportunity of voting upon them, especially if the Chancellor is going to make changes in the Clause, because we shall then need to give even fuller consideration to it. Having moved to report Progress it would be wrong for me to withdraw the Motion, and I suggest that the Committee should now come to a decision upon it.

Mr. Beswick: I must express some surprise at what the Chancellor has said, namely, that in his view there should be no great delay in dealing with Clause 9. That can only mean that he intends to give way to pressure which has been brought to bear upon the Government from outside the House. It can only mean that he is going to make some concession, which will be to a limited body of foreign residents in this country. We have just had the Chancellor refusing

to give way upon a point concerning the 11 million co-operators in this country. He has refused to make a tax concession to them, and yet from what he now says he has already made up his mind to yield to the pressure brought upon him—

The Deputy-Chairman: The Motion before the Committee is, "That the Chairman do report Progress and ask leave to sit again."

Mr. Beswick: It is upon that Motion that I wish to speak, Sir Rhys. I said that we ought to report Progress, and sit again so that we have more time to consider Clause 9, because it concerns a matter which should be very fully examined. I am most surprised that the Chancellor should take it for granted that this concession is going to be accepted so speedily—

The Deputy-Chairman: The hon. Member is not in order in discussing that.

Mr. Beswick: I am not discussing that; I am discussing what the Chancellor said upon the Motion. He said that he saw no reason why we should be unduly delayed upon Clause 9, and I am replying to that suggestion, and the implications of it, which I think are most important.
Question put and negatived.

Clause 9.-(OFFICES AND EMPLOYMENTS.)

Mr. Cyril W. Black: I beg to move, in page 9, line 2, to leave out "wholly" and insert "mainly".
This Amendment raises a comparatively simple point which I think I can deal with in a very short speech. If I understand aright the Chancellor's object in this Clause, I am not unfavourable to that object. But it seems to me that the Clause as drawn goes very much too far, and in a limited number of cases of a kind to which I want briefly to refer would, if left unaltered, impose very grave hardship.
Let me take two simple illustrations to make clear the difficulty which seems to me would arise if the Clause were left unaltered. Let us take first the case of a citizen of this country who is employed whole-time by a company or business in Paris. We will assume that the individual concerned lives in Paris for


eleven months of the year, and for one month in the year, on his annual holiday, he comes to the United Kingdom.
During the period of that month he receives a telephone call or a letter from the firm or company in Paris, requiring him to give an opinion on some urgent matter which has arisen during his absence. What is the position if he answers that telephone call or if he replies to that letter? It might very well be contended—and I think on a strict interpretation of this Clause it would be argued by the Inland Revenue—that he has not performed the duties of his office wholly outside the United Kingdom, because he has dealt with a matter connected with his employment while in the United Kingdom, although the duty that he may have undertaken represents an infinitesimal part of the whole work that he undertakes on behalf of his employers.
Let me take a second case, in which the director of a company with its headquarters and its registered office in Paris goes over to Paris once a fortnight to attend the board meeting of the company. But while in this country, between two board meetings, the same situation arises—he may receive a telephone call or a letter requiring him to give a decision on some matter connected with his employment, but at a time when he is in the United Kingdom. If that were to happen, it is quite clear that he would be caught by this Clause as it is drawn. and it would be contended by the Inland Revenue that he has not performed the duties of his office or employment wholly outside the United Kingdom.
I suggest that this difficulty can quite simply be cured by the substitution of the word "mainly" for the word "wholly," and I feel certain that with that alteration the Clause would more perfectly carry out the object which I think the Chancellor has in view. I feel sure he cannot intend to catch by this Clause the kind of case I have mentioned, and I hope very much that he will see his way to accept this very moderate and reasonable Amendment.

Mr. H. Brooke: This Clause is largely founded on the Report of the Royal Commission on the Taxation of Profits and Income, and my hon. Friend may have noted one particular passage in

paragraph 300 of the Report, where the Commission said:
We recommend that work is not the less to be treated as performed wholly in one country because certain merely incidental duties, such as returning for report, to acquire samples, etc., are carried out in another.
We accept that, and the point which my hon. Friend is putting is whether this word "wholly" should be amended to make quite sure that the intention of the Royal Commission is carried out. He said that, on a strict interpretation of the word, it would be held by the Inland Revenue that if a man were in this country, perhaps on leave, for a month during the year, and were called to the London office to give an opinion on something, or received instructions, that might conflict with the word "wholly."
We are cognisant of that point and I can assure my hon. Friend that that is not the interpretation which the Inland Revenue would put upon it. I can fortify that assurance by telling him that this same point arises from time to time in the existing law. I can conceive, for instance, that it might arise in the case of a non-resident, an overseas agent of a United Kingdom company, who might be called to London for a consultation. The tax position of that person might have to be settled under the existing law, and in such a case it is the established practice of the Inland Revenue to disregard any incidental duty of that kind.
That was what we were proposing to continue in the administration of this Clause, but I will give my hon. Friend an undertaking to look carefully at the matter afresh in the light of what he has said and in the light of the two cases he mentioned; and indeed of any other similar cases which may be brought to our notice, because we want to get this right.
If, between now and the Report stage, we can evolve a form of words which will define the position with even greater precision, we will bring that forward on Report. But I wish to be perfectly frank with my hon. Friend. It may be that we shall come to the conclusion that any attempt further to define the type of marginal case which might give rise to difficulty, were the Inland Revenue to be super-strict, would create ever greater difficulties than to leave the matter as it is.
I can assure my hon. Friend that we intend to continue to interpret the word "wholly" in the manner in which we have interpreted it when it occurs in a somewhat similar context in the existing law. With that assurance, and the further assurance that we will examine this again before the Report stage, I hope that my hon. Friend will not press the Amendment, because I must advise him that it would be impossible to go so far as to substitute the word "mainly."

Sir Herbert Butcher: I hope that in making that review to which my right hon. Friend has referred he will bear in mind that this is a context in which the words "wholly," "necessary" and "exclusively" have a special connotation in terms of decisions by the Commission and the judges.

Mr. Black: In view of the reply of my right hon. Friend, which, at any rate. partially reassures me in this matter—[HON. MEMBERS; "Not wholly?"] I still prefer the word "mainly in this context—I beg to ask leave to withdraw the Amendment.
12 m.

Mr. Gordon Walker: I hope that the right hon. Gentleman will be able to find better words, because, otherwise, we shall be in the position in which we accept the word "wholly" but do not mean "wholly." That is not the right way to legislate if we can avoid it.
Amendment negatived.

Mr. John Foster: I beg to move, in page 9. line 18, at the end to insert:
Cases I and II shall not apply to any person who satisfies the Commissioners of Inland Revenue that he is neither domiciled in the United Kingdom nor a British subject or a citizen of the Republic of Ireland.
This Amendment is designed to deal with the position of persons who are not domiciled in the United Kingdom but who are in receipt of remuneration from some office or employment in this country. A small word of explanation is necessary as to the present law. Put generally and not absolutely correctly from the technical point of view, the persons in that category at present pay

tax on their remuneration which is remitted to this country, the assumption being that they are paid outside the United Kingdom. Clause 9 as it stands will make them liable to pay tax on the whole of their salary. The object of the Amendment is to restore the position with regard to persons who are neither domiciled in the United Kingdom nor British subjects.
It has been drawn to my attention that in one respect the Amendment is too narrowly drawn because the position of Canadians, for instance, would not be safeguarded. Therefore, I commend the Amendment to my right hon. Friend in its principle, but recognise that probably if he saw any merit in the principle behind it he would have to recast it to make it fit in better with the existing law.
The main reason why I commend the principle behind the Amendment is that it would be unfair to these people in this sense. A person, usually a foreigner, not domiciled in the United Kingdom but who is working in the United Kingdom. is apt to leave quite a proportion of his remuneration in the country from whence he comes, because he has various commitments there. He might want to educate his children there; he may have dependants there; there may be insurance premiums to be paid, and various obligations of that sort. It is, therefore, quite reasonable that he should bring only a part of his salary to this country. It is also reasonable that on that part that he brings here he should pay tax. I submit that it would be unfair to tax him on the whole of that remuneration.
If the Clause were to go through as it is now, taxing these persons who are not domiciled in the United Kingdom, I fear there would be very grave practical results. The grave practical results which I fear would be that in many cases a Canadian company, for example, which has its European headquarters in this country, would decide to move to some other country where the incidence of taxation would not be so high.
Also various news agencies and foreign newspapers which have their European head office in this country would inevitably go to some place where they were not so heavily taxed. This would be a grave disadvantage to this country in the case of these information services and agencies, because the presentation of the


case to persons in North America often depends on the calibre and standing of the correspondents in this country. It would be a great source of regret to all of us if they were forced to move to the Continent of Europe.
With regard to companies trading in Europe who have their headquarters here, they spend large sums of money in this country which they would not spend if their headquarters were not here. For instance, let us imagine that there is a foreign company with its headquarters here which has on charter perhaps £100 millions worth of shipping. It would use British brokers because it is here; but, if it was in Brussels or Paris, it would use Belgian or French brokers. If a company is a buying concern for raw materials, it will use this country if it is here, but mainly foreign markets if it is on the Continent of Europe.
I do commend this Amendment. The Chancellor may not approve of the exact wording at present, but I hope that my right hon. Friend will agree to restore the legal position of these persons who live and work in this country and who contribute a very great deal of foreign exchange for Britain.

Mr. Beswick: The hon. and learned Member for Northwich (Mr. Foster) has advanced his case most carefully and persuasively, and in a very short time, which might lead the Committee to think that there is not really any great issue here. In this atmosphere, the hon. and learned Gentleman might expect the Amendment to go through quite speedily. He may think that the Committee is fully convinced of the justice of his case, but I hope that the Chancellor will not accept, in the letter or in the spirit, this Amendment which has been moved so capably.
What is proposed in the Clause as it now stands? For one thing, I think that the Chancellor is accepting a proposal of the Royal Commission on Taxation. This is a good thing, and it is refreshing to see the right hon. Gentleman accepting one of its proposals. He is trying to apply a very sound principle of taxation, namely, to collect taxation on money in the country where that money is earned. That is what he proposes, and I suggest that it is a proposal which the Committee ought to accept unamended. The position of various foreign citizens resident

and working in this country has been mentioned, and it has been suggested that if this Clause goes through as it is, they will in some way be unfairly treated. In fact, that is not the case at all.
If this Clause goes through, these citizens will be treated in precisely the same way as their fellow citizens in their own country and as British citizens are treated, for example, in the United States. One of the first tests to apply to the Amendment is this. Is the policy it is now proposed to follow the same as that which is followed for British citizens in foreign countries? The Chancellor's policy is precisely that applied to British citizens working in the United States; and I mention the United States because that is the best example to give. If there were any question of reciprocity in this matter, then I would certainly suggest that the hon. and learned Member's Amendment should be accepted. But there is no question of reciprocity at all. We are asked by the hon. and learned Gentleman to make out a special case for those citizens resident in this country. I suggest that the circumstances of the situation are such that we cannot afford to make this concession on the grounds, again, of expediency.
I admit that certain sums of money are spent by foreign firms and citizens resident in this country. It may well be that if the Clause went through there might be some immediate loss, but if we act upon the motive of expediency, as proposed by the hon. and learned Member, our position as a country will eventually be worsened rather than improved.
I agree that, on occasion, there are grounds for conceding a principle. Indeed, later Amendments suggest that tax concessions should be made in the case of certain companies pioneering in underdeveloped parts of the world in return for the pioneering work done in, say, the Colonies. But are we to accept now that we in this country are to be placed on the same footing as some of those underdeveloped areas and colonial countries? Are we now in such a bad way that we have to make concessions which are wholly against principle and which are known by the hon. and learned Member to be against principle?
By making a tax concession in the case of these individuals, a number of companies may be induced to open up in this country. We may encourage them to do


that or to remain here. If we place them in a special position of this nature, however. will it not in the long run weaken our own position? Will not these foreign enterprises, given special concessions, so strengthen their hold on this country that we see more of the kind of proposals that were discussed in the House earlier in the afternoon?
Will there not eventually be more and more proposals on the part of, say, American firms to take over British enterprises in this country? If we make them these concessions, give them this encouragement and put them in this specially privileged position, I suggest that we run the danger of seeing more of our enterprises pass under foreign control. The reaction of the House this afternoon to the proposal to hand over the Regent Oil Company to American interests would, I should have thought, have been a warning to the Chancellor. That is the kind of thing that would be facilitated by the concession for which the hon. and learned Member is asking.
There is one relevant point. It is suggested that foreign citizens resident in this country should pay tax only on that part of the money which is handed over to them in this country, but it is, of course, possible to make arrangements under which only a limited amount is paid to them here. If only a limited proportion of their salaries is paid over in this country and the rest is stored or salted away in some other country, they do not pay tax on that at all, for the United States principle of taxation says that the tax should be levied on the amount earned in the place where it is earned. The citizens concerned, therefore, would escape tax in this country because the money is not paid to them here, and they would escape tax in the U.S.A. because it is earned in this country.
12.15 a.m.
It is possible to work. to do business and to earn money over here because certain conditions operate in this country, but those conditions are created only by virtue of certain Government expenditures. For example, defence expenditure enters into the matter. It is possible to earn those sums and do that business the hon. and learned Member was talking about only because we have defence. If this tax concession is to apply, those individuals

will be enabled to earn money without making any contribution to that or the other services which are common to us all and which benefit us all equally. Companies working in Britain are able to do so partly because they call upon the services of British citizens on whose education and training money has been spent, to which British firms contribued. Foreign residents working here are to make no contribution to the educational or other social services of our country, services which make it possible for those foreign residents to operate so successfully.
I put it to the hon. and learned Member. Does he really think that a large-scale organisation in this country which has to make great decisions, probably about the spending of millions of pounds, upon, say, the hiring of ships, will make those decisions in accordance with whether or not their principal executives get a tax concession or not? Is that what the hon. and learned Member is suggesting? They will hire ships according to the value of the service they get from shipping companies. Is it not the case that British shipping concerns are giving them good value for money? If they are not, those hirers will go to the Continent. The fact that some of their principal excutives get a tax concession or not cannot enter into the higher policies of the companies in the way the hon. and learned Member suggested.
In any case, going overseas will not put them into a more favourable position, because the payments made to them will attract tax anyhow because of the taxation laws of the other European countries. There are one or two exceptions, I know. Switzerland is a case in point. It is possible for a foreign concern opening up there to make a special arrangement about taxation. I can well imagine it may be considered fair to make some arrangement, some compromise, for, say, American citizens, so that they do not have to pay higher tax than they would have to pay in the United States. There would be some element of justice in such a compromise, but that is not the compromise sought by the Amendment. Beyond that kind of concession I hope the Committee will not go.

Sir Patrick Spens: I support the Amendment. I agree entirely with the pure taxation view put


forward from the other side, but I think that the question raised by the Amendment is an entirely practical one, and I think that hon. Members who oppose the Amendment forget altogether what is the position of the City of London and this country. There are thousands of foreigners in this country representing foreign firms bringing to this country millions of pounds' worth of business every year. Those foreigners at present are being taxed only in respect of part of the remuneration which they bring over here, and on which they live, and in respect of which they pay the full rates of taxation in this country, and so contribute to the services of this country.
If this Clause goes through as it stands, all those foreigners will have their tax liability enormously increased. The Clause will impose an enormous burden of taxation on all those persons, and that, I think, has not been realised in the Committee or elsewhere. It was for that reason that I raised the matter on Second Reading; not because of any outside pressure, but because I realised what the tax situation of those people would be. If the House of Commons were not to allow an Amendment in the form proposed by my hon. and learned Friend, we would be dealing a grievous blow against the trade and prosperity of this country.
I want to emphasise the point that, as drafted—I am sorry that I did not spot it myself—we have not covered the cases of those who come from Canada or elsewhere and who are British citizens. If I may say so with respect, they are at least as important as those who come from foreign countries, and they bring us at least as much trade and prosperity. Therefore I hope that the Committee will have no hesitation in urging my right hon. Friend to grant this concession.

Mr. H. Macmillan: This Amendment raises the general question of the position under Clause 9 of persons who are domiciled overseas but work in the United Kingdom for overseas employers. It does not deal with firms, but with persons. It proposes a concession for such persons if they are not British subjects or citizens of the Republic of Ireland, whereas my hon. and learned Friend the Member for Northwich (Mr. J. Foster) explained that this was really an oversight of drafting, and he intended it to deal with British

subjects—perhaps more especially with British subjects than with others—who might come from the Commonwealth countries or the Colonies. But the Clause, as drafted, affects British subjects domiciled in Commonwealth countries overseas as well as subjects of foreign States. I want to make it clear that their position must be considered at the same time.
The issue is simple. What Clause 9 does in the case of a person domiciled overseas who is resident in the United Kingdom and works here for an overseas employer is to make him liable to our tax on his full pay for the work done here, whether that money is received here or overseas. Under the existing law, as the Committee knows, such a person has up to now been liable only on that part of his salary which is received in or remitted to this country. He has not been liable on salary credited to him abroad and left there. Since the Bill was published, this proposal has been widely and fairly discussed in the Press and elsewhere, and we have all been conscious of the existence of a real difficulty.
The hon. Member for Uxbridge (Mr. Beswick) has recalled to the Committee that this proposal was based on a recommendation of the Royal Commission on the Taxation of Profits and Income. It has been admitted, even by those who criticise the Clause, that in essence it accords with the treatment of British subjects in corresponding cases, or broadly so; for instance, under the United States tax system. It accords also with the general rule adopted in double taxation agreements that the source of income from employment is where the work is done. Therefore I think that, as a matter of logic and as a matter of principle, there was a very good case for the proposal of the Royal Commission. Indeed, it was so good a case that I adopted it and put it into this Clause.
Nevertheless it has been represented to me with some force that the effect of the Clause may be to put obstacles in the way of investments and trading in this country and from this country by overseas concerns. It might even lead to the establishment elsewhere of the overseas concerns of business undertakings which now operate or might in future


come to operate from this country. There is no doubt that we gain a great deal from that fact.
Developments of that kind—it might not be confined only to business employees; it might be wider than that—might have an adverse effect upon our general position. The question that the Committee, and I in advising the Committee, have to weigh is whether a reform in the tax code which is logical and can be defended on logical grounds can be bought at too high a price.

Sir Spencer Summers: Would not my right hon. Friend agree that the logic to which he refers would be more valid if the level of taxation in the other countries were more or less the same as ours?

Mr. Macmillan: I was coming to that. Even that is rather a difficult point to establish accurately. It depends on the different countries. I think that those who would be affected by the Clause as it stands feel some concern that the tax rate which they would have to pay here is higher than they would have to pay at home Thus, the tax bill presented to them might be appreciably greater than their saving in their own country. It would vary according to the country, but that might be, and is, felt.
Broadly speaking, what the Committee has to weigh in this sort of position is where the balance of advantage lies. I have thought this over and tried to study it impartially, and I have reached the conclusion that the general considerations to which my hon. Friends have referred and which I have been studying make it on the whole wise that in this case logic should yield to expediency and that some Amendment to the Clause is necessary.
The hon. Member for Uxbridge, who is a very gallant officer with a great record, told us that we could not afford to yield to expediency. I am not sure that it is not the other way round, that we cannot afford not to yield to it.
Although I have not studied the precise form, I would therefore propose to bring forward on Report Amendments which would have the general effect of restoring the existing position for persons

domiciled overseas who work in the United Kingdom for overseas employers. Such persons who have hitherto been liable on what has been called the remittance basis will continue to be liable on that basis and not on their full pay.
These Amendments would apply to persons domiciled in Commonwealth countries overseas as well as to persons domiciled in foreign countries. There is one exception. They would not apply to persons resident here who work for employers in the Republic of Ireland, for such persons are already liable under existing arrangements in respect of work done in the United Kingdom, and that position ought not to be changed.
I cannot say precisely what form the Amendments will take. I am sure it is felt that this should not be rushed through at a late hour. I am not really asking the Committee to come to a decision, except that I am asking it not to accept the present Amendment. There will be a full discussion on Report when the fresh proposals come before us, and the House will then be able to come to a decision.
I hope that, on that assurance, my hon. and learned Friend will be prepared to withdraw the Amendment. If hon. Members think that this is a mistaken action on my part, their position will be fully safeguarded because there can be a full discussion on Report when my Amendments have been tabled.

Mr. Beswick: So that we may consider these matters fully, will the right hon. Gentleman in his researches and reconsideration of the matter find out how many countries have this bait or inducement to foreign nationals to go and work there? Is this unique to this country?

12.30 a.m.

Mr. Macmillan: I would not put it like that. We have to weigh the matter. We will argue it out. It is the difference of tax levels which is one of the great difficulties. Also I would put it this way. It is true that there is no reciprocity. When I have said to some of my friends in other countries, "We are only proposing to treat you as you treat us", many have said "Then perhaps we must put it right". If we set this example it might well be that they will follow.

Mr. L. M. Lever: I usually do not agree with many of the things which the Chancellor submits to us, but I feel that on this matter he is 100 per cent. right. Many on this side of the Committee will not share my view, but I feel that on the general basis of taxation we can take cognisance only of what is received in this country. Although we have had a recommendation from the Royal Commission that a Clause of this nature should be included in the Bill, I think that it is on a mistaken basis which has no regard to the situation as it exists.
There are working in this country thousands of citizens of the United States of America and the Dominion of Canada. We must have regard to their position. Our financial position is such that we must encourage citizens of other countries to come here to use our country as their centre, to engage in business. I have no hesitation in saying that I should like this country to be the focal corner of the globe. I should like all countries, East and West, to send representatives to this land to do business here and to attract as much business as possible. It will be of advantage not only to those countries but to this country which, after all, is an island country.
There are different levels of taxation in other countries, in the United States and in Canada, which would make it unjust for us to tax the complete incomes of those citizens of the United States or Canada who happen to live here. They do not receive the money here. They do not expend the money here. I say to the hon. Member for Uxbridge (Mr. Beswick) that it is outside our jurisdiction whether or not they are taxed in their own countries. We are concerned only with monies coming into this country which the Chancellor intended to tax. If the money is paid to some other country outside our jurisdiction then it is outside the realms of our system of taxation. In any event, that is their business. Our business is to tax people who are ordinarily resident here and whose income is received here as distinct from money paid outside the country.
This would be a retrograde step. I want to encourage American, Canadian and continental firms to come here and make this country their centre. We should be ready to receive them.
Apart from that consideration, there is the question of expediency. We cannot ignore the fact that we are all expedient at some time or other, especially politicians. We must adopt a practical view of this matter. I hope that the Committee will accept the Chancellor's recommendations. [Interruption.] I wish my right hon. Friend the Member for Huyton (Mr. H. Wilson) would listen to me on some occasions. [An HON. MEMBER: Why?]—Never mind why, I am on my feet and I am talking, and I speak for the people of Ardwick, in Manchester. Much of their livelihood depends upon people coming from other countries, and upon the general intercourse between them and us. I am not prepared to drive foreigners out of this country when they have made it their business centre and have brought business to it. I do not want them to leave and set up their centre in France or Switzerland, so that they become the centres of contact with their countries.
I want this country to be the centre of the globe, and I make no apology for saying so. I hope, therefore, that the Chancellor's recommendation will be adopted. All these foreigners have their responsibilities in their own countries. They have the education of their children to think of; their insurances, and their home responsibilities. I should like to see the Clause withdrawn altogether. [Interruption.] Never mind about "Rubbish." I would remind my hon. and learned Friend the Member for Northampton that I am doing the talking.

Mr. Mitchison: I rise only to say that I never said anything about rubbish. I had no intention of making any criticism whatever of my hon. Friend's speech, and I do not know what he thinks he heard; it certainly was not that.

Mr. Lever: I am very sorry—

Mr. Mitchison: Further, I represent Kettering, and not Northampton.

Mr. Lever: At any rate, there seems to be a lot of talk on this side of the Committee. I am supporting the Chancellor's very wise suggestion, and I do not think there should be any untoward references to a matter to which I attach a very great deal of importance. I hope that the Committee will accept the Chancellor's very wise proposal.

Sir Ian Horobin: I want to put a completely different point for the Chancellor's consideration. I am extremely glad that he has accepted the proposal in principle, but I would ask him, when the technical drafting of these matters is taking place, to bear in mind the following point. This matter has been discussed so far from the point of view of its direct effect upon America and Canada—two rich countries, but there is also an indirect effect, which has been brought to my attention in recent weeks.
There are other parts of the world, in particular the Far East, where British firms are in rather the same position as are American and Canadian firms in this country. One of the most urgent and serious problems of all our great trading undertakings in Japan, for instance, is on the tax question. For several years we have had most difficult negotiations on this matter with the Japanese Government, and on a number of occasions when I have been in Tokyo almost the most important thing raised by our great trading firms and shipping companies has been the tax question, because we are rather in the position of the Americans; when we put our incomes into Yen we get into the millionaire bracket, much as Americans do here.
I am asking the Chancellor to make sure when he is drafting his proposals that we do not give any opening by way of precedent for the Japanese to say, "Ah! You have now admitted you were wrong in making these representations to us. We will now go ahead and tax your people out of Tokyo, because you are busy taxing Americans out of London." The Chancellor should bear in mind that we should not give to countries like Japan such an opportunity when this Clause is put through in its amended form. We should not give them any excuse for refusing what we have been for so long endeavouring to secure for our British and Commonwealth nationals in Tokyo. It is a matter of careful consideration, because the conditions are not the same—domicile is not the same, and so on. I think I have made the point clear. We must not only consider this matter as between Americans and Canadians here, but in relation to our tax interests in the Far East.

Mr. Jay: I think that even at this late hour we must make a brief protest at the way in which the Government have handled this whole issue. After all, the Chancellor presumably advisedly put this Clause in the Finance Bill. He scared the American Embassy out of its wits. A number of important American firms here—and I cannot agree with my hon Member the Member for Uxbridge (Mr. Beswick) that it was not a serious matter—were seriously considering moving to other parts of Europe. I believe the New York Times headquarters, which spends 300,000 dollars a year in this country, was going to move across the Channel if this Clause went through, and this was common knowledge among Americans here. Now if it was right, if this had to be done, and there was an unanswerable case, it may have been worth while causing all this commotion. But the Chancellor now tells us that he has changed his mind and does not think it is worth while after all. I think that is an extraordinary way to handle a matter of this kind, with all these international repercussions.
The hon. and learned Member for Northwich (Mr. J. Foster), spoke very mildly tonight, and the Chancellor spoke in a very solemn fashion, as indeed he often does. But the real truth, of course, is that the Chancellor did not really know what he had put into the Finance Bill. I think he had not read the documents which came before him, or, if he had read them, he did not really understand what he was doing. This is becoming all too common with the present Government.
We all know now that the previous Chancellor, last October, put into his Budget then a lot of proposals relating to Purchase Tax because he had not really studied what he was doing and never really meant to have done it at all. We rather expected that under the present Chancellor this would not happen again. But precisely the same thing has happened with this Clause as happened with the Purchase Tax under the previous Chancellor. The fact is that he did not understand what he was doing and has now got out of it as best he can. I can only hope that the whole of our economic policy will not be conducted in this muddled and blundering fashion in the months ahead.
12.45 a.m.
On the merits of the issue I will only say this, since the hour is now so late. I cannot believe that it would be wise to push the logic of this matter to the extent of expelling a lot of highly important American and other overseas organisations from this country. On the other hand, I do not see why all these foreign nationals living in this country should pay no tax at all in either country. It seems possible to me to find some sort of compromise between those two extremes. It is too late now to discuss what that compromise should be. Since in effect, though not very gracefully or candidly, the Chancellor has confessed his error and is proposing to put down detailed Amendments for Report stage, I suggest that we conduct our detailed examination during the Report stage rather than now.

Mr. J. Foster: In view of the assurance given by my right hon. Friend, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. H. Wilson: As a Committee we are in some difficulty about this Motion. We have heard eight or ten speeches from hon. Members opposite saying what a bad Clause this is. The Chancellor has finally convinced himself of that, even if he did not understand when the Bill was produced that this was a bad Clause, and he has undertaken to bring forward Amendments on Report. Yet we are being asked to accept the Clause. I am not suggesting that at this time of night we should debate at any length whether the Clause should stand part of the Bill, much less that we should divide against it. If we did, we should make nonsense of ourselves. The Government would have to vote that the Clause should stand part of the Bill and, on Report, that it should be taken out, so that the whole Committee would be contradicting itself.
I must reinforce the point made by my right hon. Friend the Member for Battersea, North (Mr. Jay) that here is an obvious case where the Government did not know what they were doing. This

Clause was put into the Bill without proper consideration. When they realised what had been done, and because of the outcry which has occurred, the Government had to propose to alter it. This means that during the Report stage we shall have little time to discuss this question, because we shall have to wait until the Chancellor tables down his Amendments.
I ask the Chancellor to agree to table his Amendments as quickly as possible, so that the Committee may know what he proposes. They might be as objectionable as the original Clause and it would be serious if, on Report, we had either to reject or accept something like that. There will not be a further stage at which the right hon. Gentleman could clear up the mess he might make on Report stage. This is the kind of Bill which cannot be amended in another place. Therefore I hope that, before we accept this Clause the Chancellor will agree to let the Committee and the country know—because the outcry which has created this difficulty has come from the country—of his proposed Amendments as soon as possible.

Mr. H. Macmillan: I do not begrudge our mournful friend opposite, the right hon. Member for Battersea, North (Mr. Jay), the opportunity of a little fun at my expense, nor the right hon. Member for Huyton (Mr. H. Wilson), though I did not gather from his speech whether he was in favour of the Clause or not.
Clause 9 covers a wide range of topics besides this particular point. Since it clears up the law on a number of aspects, it would obviously be right that we should let it stand part of the Bill and then present Amendments on this topic. I will certainly give the right hon. Gentleman the assurance for which he asks. I will do my best to see that we get our Amendments on to the Notice Paper as soon as possible, so that the greatest amount of time may be given to the study of them.
Since I am glad to feel that, with the exception of the hon. Member for Uxbridge (Mr. Beswick), on the whole the Opposition feel that we have taken the right course, I am sure that we will have their co-operation in securing that the Amendment is a good one and carries out our joint purpose.

Mr. H. Wilson: I thank the right hon. Gentleman for that assurance. I should not like him to jump to the conclusion too readily that we accept that Clause 9 is a good Clause. After all, we do not know what it will look like when it reaches the Report stage.
I think the right hon. Gentleman is probably right in saying that the other parts of the Clause are valuable. Certainly, they follow the Report of the Royal Commission, and, as far as I recall, the Commission was unanimous on this part of the matter. Therefore, I think there should be a general disposition in favour of accepting it. But it is very difficulty for us to say whether we shall approve Clause 9 as a whole when we do not know exactly what Amendments are to be put down in the right hon. Gentleman's name.
I do not ask the Chancellor for an answer tonight, but I hope he will consider this between now and the Report stage. Obviously, the Chancellor feels that by accepting the principle of the Amendment moved by his hon. and learned Friend, he is sacrificing what he called logic for expediency. I have no doubt that he has given a great deal of thought to this question since the Amendment was tabled—and even earlier, since the outcry began.
I wonder, however, whether the Chancellor really feels that he has solved the problem in the best possible way with the Amendments which he proposes to put down. It is clear that the Royal Commission did not approach this problem with the thoroughness and wisdom that characterised most of its recommendations. It was a fine Royal Commission, but it turns out that on this point it misjudged some of the consequences of its recommendations.
Therefore, I hope that, perhaps on Report the Chancellor will say whether he is satisfied that the position as a result of his Amendments will be what he would like it to be. After all, he has told us that he is sacrificing logic for expediency. If not, would he consider referring this relatively narrow question to a further commission, or committee of inquiry, to see whether it would be possible to meet what the Chancellor had in mind when he drafted the Bill, without causing the serious con-

sequences which result from the particular form of words which are still in this Clause which we are asked to agree shall stand part of the Clause.
Question put and agreed to.
Clause ordered to stand part of the Bill.

Clause 10.—(RESIDENCE OF HOLDER OF OFFICE OR EMPLOYMENT PERFORMED ABROAD.)

Mr. Arbuthnot: I beg to move, in page 10, line 7, to leave out from "Kingdom" to the first "the" in line 9.
The law as it stands provides that the question of where a person has a place of residence is a material factor in deciding his taxation. This Clause intends that when somebody is to be employed
full-time and wholly outside the United Kingdom
the question of whether he is resident in the United Kingdom should not be taken into account.
The Amendment is to delete the provision which requires that
immediately before fulfilling that condition
he must have been
resident or ordinarily resident in the United Kingdom.
We see no merit in the restriction of this Clause, which says that immediately before fulfilling the condition he must have been resident in the United Kingdom.
Therefore, without wasting further time at this late hour, I move the Amendment because I feel that this provision really is unnecessary and is restrictive, and that the purpose which my right hon. Friend has in mind can be fulfilled equally well without those words.

Mr. H. Brooke: I am grateful to my hon. Friend for drawing the attention of the Committee to this point. It does appear that this sort of case might arise. For example, a man in Australia might take up employment in a United Kingdom company somewhere in the Middle East, establishing his family in this country; but if he moved straight from Australia to the Middle East he would not gain the advantage of this Clause as drafted. If, however, he came to this country for a time, and was then moved out to the Middle East, he would gain the advantage.
That seems somewhat anomalous and there seems to be a great deal in the case which my hon. Friend has put to the Committee. I would not think that we should be going too wide if we removed these restrictive words; on the contrary, I think that by so doing we should also remove a possible injustice and I recommend to the Committee that the Amendment be accepted.
Amendment agreed to.
Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

Sir P. Spens: I should like to raise very briefly one point. From the opening words of the Clause,
Where a person fulfils the condition that he performs the duties of one or more offices or employments full-time …
it seems doubtful whether persons who are professionally employed or are partners in firms are included.
This point has been brought to my notice from Calcutta, where there are a number of British citizens professionally employed or working as partners in firms—even in a well-known publishing company—and I should be grateful if we could be told if such self-employed people are, or are not, intended to benefit from this Clause. Doubts have been expressed about the wording and I wonder whether the Chancellor would consider that and, I hope, include such persons as those to whom I have referred if they are not included at present.

Mr. H. Brooke: My right hon. and learned Friend has suggested that these words require further consideration. I should not like to give him an answer on the spur of the moment, especially at this hour of the morning, but I appreciate that there may be a point of substance in what he says. If he will allow us to pass this Clause, I will undertake to examine these words very carefully and, if it does appear that they might constitute an injustice to any class of persons, we will consider tabling an Amendment for the Report stage. That may not be necessary, but I promise that a decision will be made.

Sir P. Spens: I thank my right hon. Friend.
Question put and agreed to.

Clause 11.—(RELIEF FROM TAX ON DELAYED REMITTANCES OF OVERSEAS INCOME.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. John Edwards: This Clause is not very clear to us. We have had no explanation at any time, except in a few words by the Chancellor during the Second Reading of the Bill. If the Financial Secretary would say a few words about the effect of the Clause we should be grateful.

1.0 a.m.

Mr. H. Brooke: I willingly respond to that invitation, though I hope that at this hour I shall not be asked to explain every subsection in detail. The purpose of the Clause is to enable relief from tax to be given in certain cases where income from sources outside the United Kingdom, which is chargeable to tax on the basis of the amounts remitted to this country, could not for some reason be remitted in the years to which it related.
Hon. Members may recollect that this matter arose about 18 months ago and my right hon. Friend the Lord Privy Seal, then Chancellor of the Exchequer, said that he would seek Parliamentary approval to adjust the tax liability in certain cases. Those were the cases of former German civil servants now living in the United Kingdom, many of whom were entitled to a German pension which however, was for obvious reasons not remitted to them from year to year.
Indeed, it was not until the Federal German Republic passed a law in, I think, March, 1952, that these former German civil servants, living by that time outside Germany, who had been dismissed by the Nazis because of politics, race or religion, were enabled to claim from the present West German Government a pension based on the position they would have reached in the German Civil Service had they not been dismissed.
That meant that there were heaped-up arrears of pension to be paid to them. It would be most unfair in that or similar cases if the whole liability for tax fell in the year when the pension was received. In a conceivable case it might render a man liable to Surtax although his normal income, including pension, was far below that level. It seemed


altogether right that these people should not suffer that extremely bad luck, and we have drawn the Clause in terms which cover not only that particular and rather striking case, but all cases of foreign income which is assessable on the remittance basis where the tax liability is increased by the heaping up, so to speak, of remittances through causes which were outside the taxpayer's control.
The main effect of the Clause will be on income from certain foreign employments and pensions. In a few cases it may apply to foreign investment income, but the main purpose of the Clause is to safeguard the people who are in this position from the rather severe effect of British tax if it were to fall entirely on the heaped-up arrears which are remitted to them in a single year.

Mr. Edwards: Am I right in supposing that the effect of the last sentence of the Clause is that any income actually remitted in any year from 1951–52 onwards can still be the subject of claim, so that we are, in fact, going back to the Income Tax year 1951–52 in respect of moneys remitted then or since then?

Mr. Brooke: Yes. The right hon. Gentleman is referring, I think, to subsection (11). That provides that a claim under the Clause can be made in respect of income received here
in the year 1951–52 or any subsequent year".
This will cover all cases of heaped-up remittances, so to speak, which are known to us. I think that it should cover everything. If the right hon. Gentleman has a case known to him which would not be covered, perhaps he would let me know. Needless to say, the Inland Revenue has accumulated a good deal of information about this. It becomes obvious in a taxpayer's return. We think that by making it possible to claim as far back as 1951–52 we shall entirely remove this potential injustice.

Mr. H. Wilson.: We are very grateful to the right hon. Gentleman for the patient, courteous way in which he has explained this very complicated Clause. I think that the Chancellor and the Patronage Secretary and the Lord Privy Seal, whom we are glad to welcome to the proceedings at this stage will recognise that it is a very long time since

so long and complicated a Clause in the Finance Bill went through this Committee so quickly. I do not think that such a thing happened at all during the time the Lord Privy Seal was Chancellor of the Exchequer.
The reason why I think we should particularly welcome the Clause is that it fulfils an undertaking, as the Financial Secretary said, which was given by the Lord Privy Seal as long ago as November, 1954. I think that the Committee will recall the circumstances in which that pledge was given. It was given in reply to a Question by the hon. and gallant Member for Knutsford (Lieutenant-Colonel Bromley-Davenport); and we are sorry that he is not here to share in this triumph.
When the pledge was given by the Lord Privy Seal he undertook most solemnly—in November, 1954—that this matter would be put right in the next Budget. He failed to do it in the Budget of April, 1955, for reasons which, perhaps, we can appreciate, and it was not in the autumn Budget, for reasons which we cannot understand. It is a very good thing it is being done now, and no one will welcome more than the Lord Privy Seal that the present Chancellor should now, three Budgets later, give effect to what the then Chancellor promised would be done in the Budget next after November, 1954. We are very grateful to the Financial Secretary for explaining it so clearly to us.
I hope that when this Clause has been agreed we shall hear from the Chancellor, and I hope his words will be about reporting Progress. We really have been very speedy in helping him with this Clause. Clause 10 was probably badly drafted, because he had to accept an Amendment to it. No one in the Committee knows where he stands in relation to Clause 9, because, so that we could agree to it, the Chancellor had to take half of it back for further consideration. I hope that when we have agreed to this Clause we shall hear from the Chancellor what the News of the World would call "a certain proposition."
Question put and agreed to.
Clause ordered to stand part of the Bill.

Mr. H. Macmillan: I beg to move, That the Chairman do report Progress and ask leave to sit again.
I would thank the whole Committee, and not least the right hon. Gentleman, for the help given in securing that these debates have been wide enough to cover the topics as they ought to have been covered and yet conducted with speed, and certainly with great good humour. We have made, very reasonable progress, and I think that now we may hope to take up our work again on another day.
Question put and agreed to.
Committee report Progress; to sit again upon Monday next.

Orders of the Day — CHURCH OF ENGLAND (NATIONAL ASSEMBLY) (MEASURES)

Resolved,
That the Representation of the Laity Measure, 1956, passed by the National Assembly of the Church of England, be presented to Her Majesty for her Royal Assent in the form in which the said Measure was laid before Parliament.—[Commander Agnew.]

Resolved,
That the Parochial Church Councils (Powers) Measure, 1956, passed by the National Assembly of the Church of England, be presented to Her Majesty for her Royal Assent in the form in which the said Measure was laid before Parliament.—[Commander Agnew.]

Orders of the Day — SCOTTISH PRIVATE LEGISLATION (APPOINTMENT OF COUNSEL)

Motion made, and Question proposed, That this House do now adjourn.—[Colonel J. H. Harrison.]

1.11 a.m.

Mr. James H. Hoy: First, Mr. Speaker, may I express my regret to the officials and others whom we have to detain at this time. I have no regret, however, in raising this subject, because I think it is a case which will interest not only Scottish Members but the Scottish people as a whole.
I have tried my best to have the question settled amicably and without bringing it to the Floor of the House, but this I have failed to do. At the outset, I must express my strong protest that the Secretary of State for Scotland himself is not present, because the appointment is his, although I am certain that it was made on the recommendation of the Lord Advocate. In that connection, I want to say that the disgust expressed over this case once more raises the question of the Lord Advocate's patronage, but I myself this evening propose to confine my remarks to this appointment.
The Counsel to the Secretary of State under the Private Legislation Procedure (Scotland) Act carries not only a senior post but also a junior post, and the present holder of the junior post is Mr. Ronald McLarty, who was appointed in 1939. It was advertised, applications were made and, under the late Lord Cooper, who was the Lord Advocate of the day—a very distinguished man with a good eye for the right persons to fill appointments in Scotland—Mr. McLarty was appointed.
For the past 17 years, therefore, he has given distinguished and good service to Scotland under this procedure. It came as a great shock to him when he received a letter on 8th December, 1955, from the Scottish Home Department, signed by Sir Charles Cunningham, the Head of the Home Department, as follows:
Dear McLarty, I am writing to let you know that we have been considering what is to happen when Professor Fisher retires in March, 1958, and that, after the most careful examination of all the factors involved, including your recent illness, the Secretary of State has regretfully come to the conclusion that it will not be possible to offer you the


appointment. I know that this will be a great disappointment to you, and I need hardly say that I wish it could have been otherwise.
I will not quote the whole of the letter, but it goes on to pay tribute to the work of Mr. McLarty as Junior Counsel for the past seventeen years.
I thought it was the most mean and miserable thing to do to use the illness of this man, an illness which he had suffered two years previously, to tell him in 1955 that because of the illness in 1953 he could not have an appointment in 1958.
It is a most shocking thing when one remembers that the Prime Minister suffered a very serious illness and had to go to America for a cure, but it did not prevent him from becoming Prime Minister. Indeed, the Secretary of State for Scotland suffered some illness when he was the Chief Tory Whip and he had to resign from office, but it did not prevent him from becoming Secretary of State. However, apparently this Junior Counsel had an illness in 1953, and it prevents him from being promoted in 1958.
This shabby excuse is exposed in all its stupidity by a letter written a few months earlier by the Lord Advocate to Mr. McLarty, a letter not only signed by his own hand but written by his own hand, in which he offered to Mr. McLarty a position as a Sheriff-Substitute. Surely it is not going to be suggested that the post of Sheriff-Substitute, which carries a pension, is less important than the position which it is proposed to fill. Indeed, if Mr. McLarty's illness was a bar to his succeeding to the appointment which he was entitled to expect, why did the Lord Advocate offer him an appointment as a Sheriff-Substitute four months prior to the letter written by Sir Charles Cunningham?
There is no doubt that strong feeling has arisen out of the case. Indeed, the feeling is that the letter sent by the Lord Advocate four months earlier to Mr. McLarty was an endeavour to get him out of the way to make the road open and clear for Mr. Fraser's appointment. That is undoubtedly the impression that has got about.
The feeling was so strong, and the protests that I received were so many,

that I sought an interview with the Secretary of State in December last. I think the Lord Advocate would agree that I left him and the Solicitor-General for Scotland in no doubt about the strong feelings which were expressed.
I received from the Secretary of State a letter dated 9th January in which he outlined what all the posts and the salaries were, something which I very well knew, but one sentence was:
It is desirable that the Senior Counsel should be someone of standing and experience and that, if possible, he should not himself be engaged in private practice.
That is a very silly thing to say. How can one be a counsel of standing without practising? Indeed, if what was wanted was a counsel who did not practise, the right man has been picked for the job, because Mr. Fraser has appeared in court very seldom indeed. He is practically unknown in the courts, and, indeed, if it were not for his job as chairman of the pensions tribunal, he would not be known at all.
Furthermore, if it is a question of physical capacity, there is no denying that this man—I regret having to say this, but the Scottish Office raised the question of the illness of Mr. McLarty some three years ago being a barrier to his promotion—suffers from deafness which amounts practically to stone deafness. Yet this is the man who is supposed to act as a legal adviser to Members of Parliament when cases are being considered. What is the justification for appointing a man like Mr. Fraser and giving him access to Government papers?
It is a unique case. One cannot help feeling that it was a dodge, if I put it no higher than that, to place in a certain appointment a friend of the Lord Advocate. That is the feeling which prevails in Scotland.
When I raised the matter in Questions in the House, the Joint Under-Secretary said that the Scottish Office had had no real representations on the matter. It is true to say that until that time very few people knew about it, but my hon. and learned Friend the Member for Paisley (Mr. D. Johnston) certainly wishes to express some feeling about it. I myself have received many expressions of opinion from people of all political opinions. To confirm what I have said, I want to quote a letter I received from


a gentleman who is not only one of the oldest members of the Bar but who is held in very high respect in law circles in Scotland. He says:
Dear Mr. Hoy,
I am fully aware of the circumstances in which on the recommendation of the Lord Advocate, and at his instigation, arrangements have been made to deprive Mr. McLarty without reason or excuse of the prospect which he had of succeeding Mr. Fisher and in the meantime to humiliate Mr. McLarty by a clearly implied reflection on his capacity and by installing in the office occupied by Fisher and him an Advocate Mr. Colin Fraser with no official position except the curious one of unpaid successor `designate' to Fisher. As the facts are, I understand, known to you I need not repeat them. I do feel, however, that a very blunt denial is called for of the blatantly false statement in the House by Mr. Henderson Stewart, to the effect that there was no evidence of 'disgust' or disapproval among Members of the Scottish Bar. Until you raised the matter in the House of Commons the fact that such a transaction was in view was known only to a limited number of Members of Faculty but of those who had heard it I know of none who did not strongly condemn it. The facts have now become more widely known and in Parliament House I have myself heard a great deal of comment, without exception critical and resentful. I am, as you know, a Conservative, and at least twelve Queen's Counsel, including six Conservatives, and quite a number of junior counsel have expressed such opinions to me personally. Other Members of Faculty inform me that what I have said accurately represents the general attitude of Members.
I have been in practice for a longer period than any other Member now on the 'floor' of Parliament House, having been admitted in 1910 and taken silk in 1928. In that period on quite a number of occasions the exercise of the 'patronage' of the Lord Advocate of the day has excited strong criticism—sometimes more than fully justified. But no previous appointment in my time has been so generally condemned. The essence of the transaction is the displacement of a Member of Faculty who has had 17 years' training qualifying him to succeed Mr. Fisher in order to provide an official post, two years hence, for another Member who, by reason of deafness, is disqualified from most of the official positions open to Members.of Faculty.
As regards Mr. McLarty's general qualifications for the post of Senior Counsel under the Private Legislation Procedure (Scotland) Act no question arises. In that connection you are aware that the first step taken by the Lord Advocate in the sequence of events reported to you was to suggest to McLarty that he should accept an appointment as Sheriff-Substitute, an office carrying a pension, in place of the post now held by him which is not pensionable.
Even if the position is rectified, the part played by the Lord Advocate has brought his office into contempt. I say that with regret,

as I have always been on the best of terms with him.
That letter came from Mr. A. P. Duffes, Q.C.
I say, in conclusion, that I think that I have more than adequately proved the case, not only that this is a mistaken appointment but that, if it is persisted in, then all Members of Parliament who serve on these panels must consider whether they can continue to do so in view of this appointment. It weakens the whole structure. Let the Government, therefore, do the decent thing—withdraw the designated appointment and appoint Mr. McLarty, give him the promotion to which he is entitled after 17 years' loyal service in which he has rendered first-class service to those who have had occasion to serve on the panel.
I have had the honour of presiding over them when one of the members was the hon. and gallant Member for Roxburgh, Selkirk and Peebles (Commander Donaldson), and when we had to rely entirely upon the guidance of Mr. McLarty. He gave us that service not only upon that occasion but upon many previous ones. I ask the Minister to do the decent thing and remove this blot which the Lord Advocate has cast upon the profession, by restoring Mr. McLarty to the rightful position which he is entitled to enjoy.

1.25 a.m.

Mr. Douglas Johnston: I have known Mr. Fraser and Mr. McLarty for a number of years; accordingly, it is with the very greatest reluctance that I seek to intervene in this debate. Indeed, I regret that this debate is necessary. But it is necessary because the representations which were made by my hon. Friend the Member for Leith (Mr. Hoy), and later by me, to the Secretary of State were wholly fruitless, and the only method by which we might seek to achieve justice was by raising the matter in this place.
I also regret the absence of the Secretary of State, because this is not a Departmental matter which can be dealt with by the Joint Under-Secretary. It is a matter of the exercise of the patronage of the Secretary of State—a matter which touches his personal honour. It is his personal honour which is being attacked tonight. In those circumstances, it is regrettable that he should be absent.


There is another reason why he should be here. While the appointment is made by the Secretary of State, it is made, in effect, to a committee drawn from hon. Members of this House and the other place. In effect, the appointee acts as clerk to that committee. It is, therefore, a House of Commons matter.
I now move to the reasons why I intervene. My first reason arises from the statement made by the Joint Under-Secretary, upon a former occasion, that this appointment had aroused no indignation in Parliament House. At the time when he made that statement I believe he knew that I had expressed my disapproval, as had others. If he has not been satisfied of that indignation by the letter written by Mr. Duffes and read by my hon. Friend, I would say that I have spoken about this appointment to a number of members of Faculty and all of them have condemned it and are indignant about it.
Their indignation does not spring from any antipathy to Mr. Colin Fraser. His character is impeccable and he is personally most popular—and I say that he is deservedly so. The indignation springs from two factors. First, a person who has no professional qualifications has been preferred and promoted over a person who has every professional qualification, including 17 years in the junior appointment and—what has not been mentioned by my hon. Friend—is the lecturer in administrative law in the University of Edinburgh and, as such, has a very great deal of experience in the type of work which the standing counsel is required to do.
Secondly, as a result of Mr. McLarty's being allowed to continue in this appointment for 17 years, without complaint and without criticism, he has naturally been led to expect that he would succeed. As a result of that, he has not taken a normal course of applying for his patent as a Queen's Counsel at the normal time, and, consequently, has lost substantial seniority at the Bar.
Since the time of Dundass, and for many years afterwards, appointments from the Parliament House depended entirely on the colour of the person's political ties. I think that that has ceased, and from my personal knowledge of the Lord Advocate I do not think he would allow

political considerations to influence appointments. There are no politics in this. But the fact that politics are out of it is not sufficient. What the Secretary of State and the Lord Advocate must do in making this appointment is to make it abundantly clear to everyone that merit is the criterion for the appointment and that merit only should count.
I regret very much that from my knowledge of both the persons, and the work that requires to be done, I am satisfied that merit has not been the criterion in this appointment.

The Joint Under Secretary of State for Scotland (Mr. J. Henderson Stewart): Despite the somewhat harsh and, I think, quite unwarranted, words used by the hon. Member for Leith (Mr. Hoy), I still cannot begin this short reply without saying how glad I am to see him in his place again and apparently restored to his full health. We all hope that he will retain that good health. I wish I could be equally felicitous about the speech he made a few minutes ago. The best I can say of it is that it was a very unfortunate utterance from every point of view.
The charges made by him against my right hon. and learned Friend the Lord Advocate, are, as I shall show, utterly without foundation. In the interests of the public service it is a pity that the hon. Member allowed himself to make those charges, and I can only hope that when I have explained the position he will feel disposed to withdraw them.
The hon. Member read a letter said to be from Mr. Duffus, indicating that there is complaint. That may be so, but I say this to the hon. Member: we in the Scottish Office have had no representations whatever from anybody at all except the hon. Member for Leith and the hon. and learned Member for Paisley (Mr. D. Johnston). That is an interesting point.
The facts about this matter are simple and the steps taken were not only correct, but strictly in accord with longestablished practice. The facts are very well known to hon. Members. Except for a short time, between 1937 and 1939, the Secretary of State has always had two Counsel—a Senior and a Junior—on this particular work. It is difficult, important work which these Counsel have to perform and, therefore it is desirable


and, indeed most necessary that the senior counsel especially should be an advocate of public standing and experience, and, in view of the responsible position he holds, should if possible, not be engaged in private work.
The present senior counsel, as we have heard, Professor Fisher, has occupied this post since 1937. He holds a chair in the university. The junior counsel is Mr. McLarty, who has held the position since 1939. He also holds an appointment as lecturer in the university. Both posts are subject to age limit retirement at seventy, and Professor Fisher will retire when he reaches that age in two years' time, in March, 1958. Since the work entailed in that post requires special knowledge, which can only be gained by actual experience, it was decided about the middle of last year that it was necessary to make arrangements in good time for the appointment of a successor to Professor Fisher.
I should not have to say this, but I had better do so. Naturally, the claims of the present junior counsel were the first to be considered. No criticism could be or was made about the services of Mr. McLarty, which have been eminently satisfactory. But I am asked by the Secretary of State to say precisely that after the most careful examination of all the factors, including, of course, his recent illness, although that was the least important, my right hon. Friend decided that it was not possible to offer to Mr. McLarty the post of senior counsel. In view of Mr. McLarty's record this decision was reached by my right hon. Friend with much reluctance, and only because he was convinced, as he is still convinced, that it was in the public interest that that step should be taken.
The question then arose about a successor. The Lord Advocate was consulted. The hon. Member for Leith has suggested that my right hen. and learned Friend took the opportunity to push the claim of his friend, Mr. Fraser. I can only say that that is one of the several mistakes of assumption and narration which the hon. Member made in his speech. In fact, Mr. Fraser's was not the only name which my right hon. and learned Friend submitted for consideration. But the ultimate choice, for which he takes full responsibility, was that of the Secretary of State.
In view of the remarks of the hon. Member for Leith and those of the hon. and learned Member for Paisley, I had better say, plainly and frankly, that in his choice, as in his decision about Mr. McLarty, the Secretary of State acted on the unanimous advice of all those whom in accordance with strict practice in these matters, he consulted; and he had consultations with all the persons normally consulted in such a matter. Mr. McLarty was invited by letter in December—

Mr. D. Johnston: I have some knowledge of how these appointments are made from the reason that I was a Law Officer for four years. So far as I know, the normal practice is that only two persons are consulted. The Secretary of State consults only one person, or it may be two, the Lord Advocate and the Solictor-General. Was either of those persons consulted?

Mr. Stewart: I am sure that, with his experience, the hon. and learned Member will not ask me to debate with him in public who should, or ought to be, or was, or who may be consulted in the future. I refuse to do that, because I think it would be wrong. But I repeat that all those who, in the past, and in accordance with practice have been consulted, were consulted, and all of them were unanimous in both matters.
As we all know, Mr. Fraser has now been designated as the successor. When he was offered the position he agreed that for two years, until Professor Fisher retired, he would understudy the professor in his work in order to gain the necessary experience. It is true that at the time Mr. Fraser had no experience. But the same criticism could have been made of any possible successor to Professor Fisher other than Mr. McLarty, who was not regarded as suitable for the position.
It was said, or it has been said, that Mr. Fraser's work as Chairman of the Pensions Appeal Tribunal was coming to an end and that this was an easy way of getting him a job.

Mr. Hoy: Who said that?

Mr. Stewart: I have heard it was said outside.

Mr. Hoy: By whom?

Mr. Stewart: I had better look at the facts. I am answering a criticism that I have heard, and the answer is that his


work is not coming to an end. The Appeal Tribunal's work is not coming to an end. In 1955, the number of cases received by the tribunal was higher than it was in the previous year.
The hon. Member criticised Mr. Fraser's appointment on the ground that he was deaf and needed a hearing aid. I believe that the hon. and learned Member for Paisley also made that criticism. It is true that Mr. Fraser needs a hearing aid, but that disability has not interfered with the proper discharge of his duties as Chairman of the Pensions Appeal Tribunal. Everyone says that he has done that job exceedingly well and that there is no reason to believe that he will

not be able to do this other one equally well.
The truth is that all the criticisms, charges and complaints of hon. Members are quite baseless. The Secretary of State has acted in strict accordance with practice and he believes that he has acted honourably and in the proper discharge of his duties.
The Question having been proposed after Ten o'clock on Thursday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at nineteen minutes to Two o'clock.